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The World BankFOR OFFICIAL USE ONLY

Report No. 6373-MA

STAFF APPRAISAL REPORT

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

November 25, 1986

Projects DepartmentEast Asia and Pacific Regional Office

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

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CURRENCY EQUIVALENTS

Currency Unit - Ringgit (M$)M$ 1.0 US$0.4US$ 1.0 = M$2.5(As of .June 1986)

FISCAL YEAR

NEB : September 1 - August 31Government : January 1 - December 31

WEIGHTS AND MEASURES

km = Kilometer (0.62 miles)kg Kilogram (2.205 pounds)Ton Metric ton (1,000 kilograms)kW = Kilowatt (1,000 watts)MW = Megawatt (1,000 kilowatts)kVA = Kilovolt-ampere (1,000 volt-amperes)MVA = Megavolt-ampere (1,000 kilovolt-amperes)kWh Kilowatt hour (860 kilo calories)GWh = Gigawatt hour (1,000,000 kilowatt hours)kV Kilovelt (1,000 volts)BTU = British Thermal Unit (0.253 kilo calories)MMBTU = Million BTUb/d Barrels per day (1 barrel = 159 liters)TOE = Tons of oil equivalentMMTOE = Million TOEMMCFD = Million cubic feet per daytcf = Trillion cubic feet

ABBREVIATIONS

EPU - Economic Planning UnitLRMC - Long Run Marginal CostMOE - Ministry of Energy, Telecommunications and PostsNEB - National Electricity Board of the States of MalayaPETRONAS - National Petroleum AgencyPGSB - Petronas Gas Sdn.BerhadSEB - Sabah Electricity BoardSESCO - Sarawak Electricity Supply Corporation

FOR OMCIAL USE ONLY

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

STAFF APPRAISAL REPORT

Table of Contents

Page No.

Loan and Project Summm ary.....................,............... iii

I. THE ENERGY SECTOR ........................................... 1

B. Energy Resources...... ......... 0 ...................... 1C. Energy Consumption ................ . . ....... ................ 2D. Sector Institutions (Energy and Power)..................... 2

II. THE POWER SECTOR ............................................. 3A. The Po;wer Market ................................. 3B. Generation and Transmission Facilities.................... 4C. INEB's Development Program........................................ 4D. Sector Strategy and Rationale for Bank Participation...... 5

III. THE BENEFICIARY ................. 7A. Introduction ... 7B. Orgn rai g.. a n i z a ti on.... ............. 8C. Financial Management ........... .... .... . 12

IV. THE PROJECT ..........- O.................................. 15A. Project Objectives ....... 15B. Project Description.... o................................. . .. 16C. Cost Estimateso ................................. 18DD. Fina cninggP anl.n. .* * . * .. ..* ... .. ..*. . .... ..... ... .. . .... * a 20

E. Project Implementation, Procurement and Disbursement ...... 20F. Environment ...... ........ ... 23

V. FINANCE...................................................... 23A. Introduction .................................. 23B. Past and P'resent Financial Performance.................... 24C. Tariff*.................................................... 28D. Financing Plan. ............................. .............. 28E. Future Finance ............................. ......... ..... . 30

This report was prepared by D.B. Mehta, J. Sopher and H. Razavi who appraisedthe project in May 1985.

This document has a restricted distribution and may lNe used by recipients only in the performanceof tht;ir oficial duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Page No.

VI. PROJECT JUSTIFICATION AND RISKS ............................... 32A, Justification .... 32B. Economic Rate of Rotur n ................................. 33Co ii ................ 34

VII. AGREEMENTS AND RICONMENDATIONS ............................... 35

ANNEXESAnnex 1 - NEB's Actual Electricity Sales, Generation, Peak Demand, Installed

Capacity and Number of EmployeesAnnex 2 - NEB's Transmission and Distribution FacilitiesAnnex 3 - Forecast of NEB's Electricity Sales, Generation, Peak Demand and

Installed CapacityAnnex 4 - Forecast of Electricity Demand by Consumer Category (Tables 1,2,3)Annex S - NEB's Long-Term Generation Expansion Program (1986-95)Annex 6 - National Electricity Board -- Orgarization ChartAnnex 7 - Management Services and Development Department Consulting Study --

Terms ef ReferenceAnnex 8 - Human Resources Development Advisory Services -- Terms of

ReferenceAnnex 9 - Materials Randling Study -- Terms of ReferenceAnnex 10 - Coet Estimate -- Thermal Power Plant RehabilitationAnnex 11 - Cost Estimate -- Computerized Maintenance Management System for

Thermal and Hydro PlantsAnnex 12 - Cost Estimate -- Thermal Power Plant: Conversion from Oil to

Oil/Gas FiringAnnex 13 - Cost Estimate -- System Control ImprovementsAnnex 14 - Cost Estimate -- Substations for Transmission System

Rat 5onalizationAnnex 15 - Cost Estimate -- Transmission Lines for Transmission System

RationalizationAnnex 16 - Cost Estimate -- Consultancy ServicesAnnex 17 - Disbursement ScheduleAnnex 18 - Implementation ScheduleAnnex 19 - NEB's Annual Financial Statements - 1982-1995 (projected)Annex 20 - Inventory of Fixed Assets and Fixed Asset Accounting Study --

Terms of ReferencaAnnex 21 - NEB's TariffsAnnex 22 - NR.B's Investment Program - Calculation of the Internal Economic

Rate of ReturnAnnex 23 - Project Components - Calculation of the Internal Economic Rate of

ReturnAnnex 24 - Distribution System Planning Consulting Study - Terms of ReferenceAnnex 25 - Documents in Project File

MAP IBRD 20157

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MALAYSIA

ENERGY EFFICIENCY AND PLANT RERABILITATION PROJECT

Loan and Project Summary

Borrower: National Electricity Board of the States of Malaya (NEB)

Guarantot: Malaysia

Amount: US$100 million equivalent

Terms: 15 years, including three years grace, at standard variable

interest rates

ProjectDescription: With the recent sharp decline in foreign exchange earnings,

Malaysia is facing severe resource constraints. In thisenvironment, NEB's immediate concern is to maximize the opera-tional efficiency of its existing facilities and optimize itsuse of the country's energy resources. The proposed projectseeks to achieve these objectives, through emphasis on improv-ing the efficiency of thermal power stations, replacing oilwith natural gas as the primary fuel for power generation,introducing a more effective maintenance management system forthermal and hydro power plants, rationalizing the transmissionsystem, modernizing system operation and control, and further-ing specific institutional capabilities.

The project includes: (a) rehabilitation of 1290 MW of plantat Tuanku Jaafar, Prai and Sultan Iskandar thermal power sta-tions; (b) conversion of 600 MW plant at Tuanku Jaafar and240 MW plant at Sultan Iskandar from oil to oil/gas firing;(c) introduction of computerized maintenance management systemsat all major thermal and hydro stations; (d) modernization ofthe national load dispatch center; (e) installation of regionaldistribution control centers at Penang, Johor Baru and Klang;(f) installation of about 72 km of 275 kV and 132 kV trans-mission lines and nine 275/132/33 kV and 132/33 kV substations,needed for rationalizing the power supply system for KualaLumpur and its environs; (h) technical assistance to strengthenNEE's capabilities in: (i) distribution system planning,(ii) management services, (iii) materials management,(iv) fixed assets accounting, and (v) human resourscesdevelopment.

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The project is expected to contribute significant benefits inthe form of (a) fuel savings; (b) increased capacity, betteravailability and prolonged plant life; (c) more efficient andreliable system dispatch and control; (d) reduced losses andgreater transmission reliability; and (e) enhanced institu-tional efficiency.

The project faces no substantial risks.

Estimated Costs /a

Local Foreign Total--- (US$ million) ----

Thermal power plant rehabilitation 3.2 13.3 16.5Thermal power plant conversion

from oil to oil/gas firing 2.6 10.6 13.2Computerized maintenance managementsystem for thermal & hydro stations 0.6 1.0 1.6

System control improvements 3.6 20.1 23.7Transmission system rationalization 36.1 42.6 78.7Consultancy services for: thermal plantrehabilitation, distrbution system planning,materials management, management services,fixed assets accounting, and humanresources development 1.2 4.4 5.5

Total Base Cost 47.2 92.0 139.2

Physical contingencies 4.7 9.2 13.9Price contingencies 2.3 4.6 6.9

Total Project Cost 54.2 105.8 160.0

Interest during constructionBank loan - 20.5 20.5Others - - -

Total Financing Required 54.2 126.3 180.5

Financing Plan:

Local Foreign Total PercentSource of funds -------- (US$ million) ------

World Bank 0 100.0 100.0 55NEB 54.2 26.3 80.5 45

Total 54.2 126.3 180.5 100

Estimated Disbursement:Bank FY 1987 1988 1989 1990 1991 1992 1993

Annual 1 16 26 22 15 11 9Cumulative 1 17 43 65 80 91 100

Rate of Return:

NEB's investment program 12%Thermal plant rehabilitation andmaintenance management 20%

Transmission system for rationalizingsupply to Kuala Lumpur 14%

Conversion from oil to gas firing >100%

/a NEB is exempt from liability for import duties and taxes on the project.

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

I. THE ENERGY SECTOR

A. Overviaw

1.01 Over the last 15 years, Malaysia's commercial energy consumptionincreased at an average rate of 8% from 3.8 million tons of oil equivalent(MMTOE) in 1970 to 12.1 MMTOE in 1985. This was mainly due to growth andstructural changes in the economy. The average annual growth rate of GDP was7%, in which industrial and services sictors expanded their shares from 22%and 41% of GDP in 1970 to 29% and 51 in 1985. The growth in energy consump-tion was primarily dependent on oil. Until 1983, the share of petroleum intotal energy coriumption was more than 90X. With the advent of natural gasproduction, the share of oil declined in 1984 to 881, while natural gas (5%),hydropower (4%) and coal (3%) comprised the remaining 12Z. The share of oilin commercial energy consumption is projected to decline to 60% in 1990 and49% in 1995$ while the share of natural gas is expected to increase to 27% and38% respectively in these year3. The share of hydropower will remain around4%, while that of coal will increase to 6X in 1990 and 11% b: the end of thecentury. However, the projections regarding the increasing share of naturalgas are based on the assumption that appropriate promotional and pricingpolicies will be in place, to encourage gas utilization in all sectors of theeconomy.

B. Energy Resources

1.02 The principal indigenous sources of energy in Malaysia are crudeoil, natural gas, hydropower and traditional fuels (palm oil wastes, fuelwoodand charcoal). Proven reserves of crude oil are estimated at 3.5 billionbarrels. The production level, which was insignificant before 1967, reached430,000 b/d in 1985. Although Malaysia's crude oil production is sufficientto meet its domestic demand (presently about 200,000 b/d), the country dependson imported crude and petroleum products to satisfy about 70% of its need.This is because Malaysia's crude oil (being light and low in sulphur content)fetches a premium in the world oil market but does not yield enough of thefuel oil demanded in the country. Malaysia's net export of petroleum is about230,000 b/d.

1.03 Proven and economically recoverable natural gas reserves in Malaysiaare oresently estimated at about 53 trillion cubic feet (tef). Natural gasprodu-tion began on a commercial scale in 1983 at a rate of 314 million cubicfeet per day (MMCFD) and is presently about 1,200 MMCFD; of this about 85% isfed into an LNG plant located in Bintulu (in Sarawak), s?hose output is sold toJapan based on a 20-year contract. The remaining 15% is used in the combinedcycle power station in Paka, the TrenggaLu steel mill and the Labuan methanoland hot briquetted iron plants, all of which are located on the east coast ofPeninsular Malaysia, to which the off-shore gas has so far been piped. Poten-

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tial for increasing LNG exports is limited by a depressed internationalmarket. Prospects of piped gas export are also limited to about 150-200 hMCFDthat the Singapore Public Utilities Board nay buy; however, no firm agreementhas so far been reached between the two countries. The largest potential forutilization of natural gas is in the domestic market, most of which will be inthe power sector. This would however require construction of pipelines fromthe east coast to the western parts of Peninsular Malaysia, where majorthermal generating facilities are located.

1.04 Hydropower resources are assessed at about 27,000 MW (123,000 GWhper year). However, only about 13% of the hydro resources exist in PeninsularMalaysia where some 83% of the total Malaysian population resides and morethan 90X of the electricity is consumed. Present hydro capacity in PeninsularMalaysia is about 1,150 MW (3,000 GWh) and will reach 1,300 MW with the addi-tion of plants currently under construction. Sarawak's hydropower potential,on the other hand, is estimated at 20,000 MW (87,000 GWh per year), whileSabah's major hydro sites are capable of producing 4,000 MW (20,000 GWh peryear). The Government has been seeking ways to harness Sarawak's hydroresources. Presently, the most important hydro project under consideration isBakun with a potential capacity of 2,400 MW. This hydro site is located innorthern Sarawak and could provide power to Sabah, Sarawak, Kalimantan (inIndonesia) and, through an 1,800-km AC and DC (overhead cum submarine link),to Peninsular Malaysia. The timing to implement this project is at presentuncertain (para. 2.12).

C. Energy Consumption

1.05 Malaysia's energy consumption reached 14.2 MMTOE in 1985, of whichabout 2.1 MMTOE vas supplied from traditional fuels and 12.1 MMTOE fromcommercial sources. The agricultural sector consumed about 8% of the totalenergy in 1985 but its share is forecast to decline to 5% by the year 2000.The industrial sector consumed about 41% of the total energy in 1985. Dieseloil (51%), fuel oil (25%), and electricity (24%) constituted about 60% ofenergy consumption in this sector while traditional fuels made up the rest.The share of this sector in the total energy is expected to grow to 46% by1995. The transport sector accounted for 28% of energy consumption and 45% ofpetroleum product consumption in 1985. The share of this sector in the totalenergy consumption is forecast to declfne to 26% by the end of the century.The residential/commercial sector accounted for 23% of the total energyconsumption. The residential sector consumed about 60% cf this energy.Traditional fuels constitute 36% of the residential energy consumption whilekerosene (3SZ), electricity (14%) and LPG (11%) represent the balance. Thissector's share of energy consumption is expected to decline to about 18% bythe end of the century. The structure of the demand in the residential sectoris expected to change substantially; LPG (36%) and electricity (38%) areprojected to replace a large portion of traditional fuels.

D. Sector Institutions (Energy and Power)

1.06 Coordination in energy planning and implementation is achievedthrough a high level Cabinet Committee on Energy. This committee, formed in1980 and consisting of the Prime Minister, the Deputy Prime Minister,

Ministers of Energy, Trade and Industry, and Science and Technology, isresponsible for developing the country's long-term energy policy, andapproving and supervising the implementation of energy plans and projects.This committee is supported by a "Committee of Officials" chaircd by the ChiefSecretary to the Government and having representatives from Petronas, theTreasvry, the Ministries of Energy, Science and Technology, Trade andIndustry, the National Electricity Board (NEB) and the Economic Planning Unit(EPU).

1.07 Petronas, established in 1974 as a government company, has theoperating responsibility in the oil and gas sector. Malaysia's PetroleumDevelopment Act gives it exclusive rights tn supervise work programs forexploration and production, and to negotiate production sharing agreementswith contracting oil companies. Petronas also has its own explorationactivities which are undertaken through a subsidiary company, PetronasCarigali Berhad, formed in 1978. In addition, Petronas Gas Sdn Bhd (PGSB),another subsidiary of Petronas, was created in 1984 to implement and operategas utilization projects in Peninsular Malaysia. Its activities include theconstruction and operation of gas processing plants and gas transmission anddistribution facilities.

1.08 The responsibilities for power sector development and operation liewithin the province of the Ministry of Energy, Telecommunications and Posts(MOE) and the three power utilities, NEB, the Sabah Electricity Board (SEB),and the Sarawak Electricity Supply Corporation (SESCO). NEB is responsiblefor power generation, transmission and distribution in Peninsular Malaysia.SEB and SESCO serve the same function in the two states on the island ofBorneo, which lies nearly 700 km east of Peninsular Malaysia. MOE serves asthe official channel between the utilities and the Cabinet Committee on Energyand is responsible to ensure the efficient utilization of resources in theseutilities.

II. THE POWER SECTOR

A. The Power Market

2.01 Electricity supply in Malaysia grew at a rapid pace over the pasttwo decades. Total sales and per capita consumption increased from 1,210 GWhand 125 kWh respectively, in 1965 to 11,940 GWh and 769 kWh in 1985. NEB'sshare of total sales was about 90% (10,811 GWh in 1985). The industrialsector has, since the 1970s, become the major consumer acccunting for 46% ofthe sales in 1985. Commercial (33%) and residential (21%) sectors representthe balance. Growth in total demand is tentatively projected at about 7% perannum, much slower than the average historical rate of 12%. This is mainlydue to lower medium term growth prospects for the economy. The annual growthrates of electdicity consumption in the industrial, commercial and residentielsectors are projected at 8Z, 5% and 7%, respectively.

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B. Generation and Transmission Facilities

2.02 The Dower sector's present total installed capacity is 4,580 MW ofwhich 3,781 MW belongs to NEB. The major part (42%) of NEB's capacity isbased on oil fired steam plants, while hydro power (30%), gas fired combinedcycle (16%), oil fired combustion turbine (7%) and diesel (5%) comprise therest. In 1985, NEB's total energy gener.tion was 12,730 GWh consisting of oil(58%), hydro (24%), natural gas (9%) and diesel (9%). Annex 1 shows thehistorical growth oi NEB's energy generatior, and installed capacity. Annex 2presents the growth of NEB's transmission and distribution facilities. Withtne development of natural gas resources, and along with continued exploita-tion of hydropower, a fundamental transformation in fuel mix for electricitygeneration is underway. The oil-based generation has reduced from 80% in 1980to 58% in 1985 and is expected to decline substantially by 1991. This is onthe assumption that NEB's existing oil fired stations would be converted tooil/gas firing by 1990. The share of natural gas in the total electricitygeneration is expected to increase to 47% by 1990 while coal (23%), hydro(17%) and oil (13%) are projected to make up the rest. Annex 3 shows theforecast of NEB's energy sales, generation mix and installed capacity fir the1986-95 period.

C. NEB's Development Program

2.03 A forecast of load growth, based on growth rates substantially lowerthan earlier envisaged, was tentatively finalized by thh Bank's Power SectotReview mission (para. 2.12) in May 1986. According to thiu load forecast,NEB's energy sales are projected to grow at 6.9% p.a. during the Fifth Planpe-iod (1986-90) and 7.3% p.a. during the Sixth Plan period (1991-95). ThebreaLdown of sales forecast by consumer category is given in Annex 4.

2.04 To meet the growth in demand, the Bank's Power Sector Review missionworked with NEB and using the WASP package, prepared a long-term generationexpansion program which is shown in Annex 5 and summarized in Table 2.1.

Table 2.1: SUMMARY OF NEB'S GENERATION EXPANSION PROGRAM (1986-95)(Addition in OW)

Fifth Five-Year Plan Sixth Five-Year PlanFuel (1986-90) (1991-95)

Hydro 60 -Natural gas 120 900Coal 600 /a -

Total 780 900

/a This refers to Units 3 and 4 for the Port Klang power station, which areexpected to be commissioned in 1988 and 1989 respectively.

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2.05 Plant additions ap to 1989 have already been committed and NEB willhave excess capacity until 1993; only thereafter do further capacity additionsbecome necessary. The least cost generation expansion program is predomi-nantly based on combined cycle power plants buring natural gas.

2.06 Associated with the generation expansion program described above isthe followik.g transmission expansion program.

Table 2.2s SUMMARY OF NEB'S TRANSMISSION EXPANSION PROGRAM (1986-95)

Fifth Five-Year Plan Sixth Five-Year Plan(1986-90) (1991-95)

Transmission lines (ckm)275 kV 1,468 670132 kV 1,588 1,040

Substations (MVA)275 kV 2,840 1,940132 kV 3,045 1,200

2.07 NE5's transmission expansion program is developed with theassistance o. Westinghouse's Transmission Planning Software (TPS), whichyields the least cost sequence of development mee ing specified contingencycriteria.

D. Sector Strategy and Rationale for Bank Participation

Experience with Past Loans

2.08 The Bank has made elevEn loans to NEB for financing the expansion ofelectricity generation and transmission capacity and development of ruralelectrification. The projects under the first eight loans have been completedand are operating satisfactorily. The implementation of the ninth powerproject is also on schedule. The implementation of the tenth power project(rural electrification) has been slowed down because of the Government'sdecision to reduce investments on rural electrification and the minihydroprogram due to constraints on its domestic resources. The project is expectedto be completed about two years behind schedule. The eleventh power projectis presently in the procurement stage and as procurement has been delayed, theproject is currently running about one year behind schedule.

2.09 The Project Completion Report for the eighth power project (Loan1443-MA) noted the impressive financial and insti.tutional prc*ress made by NEBand pointed out certain areas such as improvement in operation of thermal/hydro plants and distribution system planning where strengthening wasrequired. The report also pointed out the need for reducing staffing in thenon-technical cadres. Bank's participation in the sector has thus helred NEB

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to develop into a technically competent and efficient power utility. Throughits continuing dialogue with the sector institutions, the Bank has beeninstrumental in assuring the overall adequacy of electricity tariffs and inensuring the sector's financial soundness. The Bank has also financed andsupervised a study on tariff structure (under Loan 2438-MA), some recommenda-tions of which were taken into consideration by the Government whileintroducing tariff changes in 1985.

Sector Strategy

2.10 The Malaysian economy is highly dependent on petroleum exports bothfor foreign exchange earnings and for financing of its public expenditures.In 1985, exports of petroleum generated about US$2.1 billion in foreignexchange and supported more than 252 of all federal expenditures, or 902 offederal capital spending. The rapid decline of oil prices has reducedgovernment petroleum revenues to an estimated level of US$1.1 billion in1986. Because of both (a) increasing domestic use of petroleum and(b) reduced export earnings from tin, palm oil and rubber, the economy facesserious financiat constraints. Besides, the country's investment outiays havebeen far above its national savings, resulting in a very large current-accountdeficit that has to be financed through commercial borrowing. The Governme1.tis therefore concerned that: (a) domestic use of petroleum will rapidlyabsorb the share of exports which would in turn lead to a sharp decline in oilrevenues; (b) investment requirements of capital intensive and import-intensive projects, including those of the energy sector, will impose inincreasing burden on public budget; and (c) the widening gaps between importsand exports, and between investments and savings would increase the country'sdebt-service ratio and resource gap beyond acceptable levels. It has decidedto remedy the aforementioned trend in the energy sector by: (a) moreefficient management of present (capital and manpower) resources; (b) morestringent screening of major investment projects; and (c) diversification andconservation of energy use to release more petroleum for export. The Banksupports this strategy.

eationale for Bank Participation

2.11 In view of the present resource constraints facing the Malaysianeconomy, issues of immediate concern to NEB are to optimize the utilization ofinvestments already made, reduce the operational costs of its facilities andimplement a fuel strategy based on substitution of oil (which is a scarceresource) with natural gas (which is available in abundance). In financingthe proposed project, the Bank will be assisting NEB in realizing theseimmediate prioritiea. Such assistance complements the continuing policydialogue with the Government on longer term issues facing the energy sector ingeneral and the power sector in particular. Indeed, since, the Government ofMalaysia is currently in the process of formulating its energy master plan, ithas sought the Bank's assistance to help it resolve some of the criticalissues. Concurrently with the appraisal of the proposed project, a BankSector mission reviewed critical issues and options in the power sector. Afew of the critical issues addressed related to the cost of gas, thefeasibility of the 2,400 MW Bakun hydroelectric project and operationalefficiency aspects of the three utilities.

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2.12 Some major tentative findings of this power sector review, regardingNEB's investment and operation were:

(a) NEB's generation expansion program, prepared in September 1985 wasbased on (i) a high load forecast; (ii) a gas cost based onfinancial rather than economic considerations; and (iii) 1,500 MW ofpower imported from the 2,400 MW Bdkun hydroelectric project. Theexpansion program is instead recommended on the basis of: (i) alower load forecast; (ii) a newly computed economic cost of gas ofM$3.5/MKBTU on the West coast of Peninsular Malaysia compared toabout M$6.8/MMBTU used in earlier studies; and (iii) generationexpansion using gas as fuel in combined cycle plants.

(b) The 2,400 MW Bakun hydroelectric project costing about US$6 bil-lion, would lock the power sector's investment program into a rigidblock of supply during a period when the country's financialresources will be severely constrained and when the growth in demandand thus the ability to absorb the additional electrical energy isuncertain. Since the project is only marginally viable, the timingof its construction should be chosen based on its economic advantageover alternative energy sources.

(c) Substantial savings in NEB's generation costs can be achieved by:(i) rehabilitating selected thermal stations and converting someoil-fired steam units to gas firing; and (ii) implementing a plantefficiency and maintenance management system.

(d) NEB needs to: rationalize the transmission system, install staticreactive power compensation, remodel its system control facilitieswith introduction of new dispatch software and hardware, andintensify operator training to achieve significant improvement insystem performance.

III. THE BENEFICIARY

A. Introduction

3.01 The Borrower of the proposed loan will be the National ElectricityBoard (NEB) of the States of Malaya (Peninsular Malaysia), an autonomous Boardowned by GOM. It was established under the Electricity Act of 1949. NEBcomes under the direct jurisdiction of the Minister of Energy, Telecommunica-tions and Posts. It has responsibility for generating, transmitting, distri-buting, and retailing electricity throughout the peninsula.

3.02 NEB's management enjoys broad indepe, ence in managing day-to-dayaffairs. So long as it follows GOM guidelines, management provides the pre-dominant inputs for decisions concerning planning, contracting, pricing, andfinancing of investment. However, NEB must observe GOM procedures, particu-larly those which concern the exercise of managerial responsibility anddeployment of staff.

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B. 2rganization

Structure

3.03 NEB's operational and policy decisions are made by the Board ofDirectors. All members of the Board are appointed by the Minister of Energy,Telecommunications and Posts, who establishes their terms. The Chairman ofthe Board is the Chief Secretary to the Government and the Deputy Chairman isNEB's General Manager.

3.04 NEB's organization chart is displayed in Annex 6. Its operationsare divided into four major departments: Development Planning, Major Proj-ects, Operations, and Administration. Each major department is headed by aDeputy General Manager. The Development Planning Department, which combinesthe functions of technical and financial planning, coordinates the activitiesof the different departments. In addition to the four major departments, NEBhas a Corporate Audit Department and three other smaller specialized depart-ments located at headquarters. Their activities include rural electrifica-tion, materials management, and accounting. The officers in charge of theseactivities report directly to the General Manager.

3.05 NEB's field activities are organized into six regional operations,which are subdivided into district offices and stations; the regions areidentified as Northern, Perak, Selangor, Southern, Eastern and FederalTerritory. Some of the responsib%lities of the district offices includebilling and collections, erection and maintenance of distribution lines, andoperation and maintenance of diesel and mini-hydro plants within thedistrict. Station offices are generally units wkich operate and maintainparticular generating facilities or substations, or provide special servicesto a particular local area. All remaining operational functions, includingload dispatch, are centralized and housed at headquarters.

Management

3.06 Decision-making at NEB is highly centralized with many decisionsconcerning expenditures at field offices being made at headquarters. As NEB'sscope of business grows larger and its operations become more complex techni-cally, the range of decision-making will increasingly exceed the capacity ofNEB's organization structure. Already, NEB's management recognizes that somedecisions are not being made sufficiently quickly to satisfy the needs offield offices. In turn, reports from field locations do not reach head-quarters as rapidly as needed for decision-making purposes. NEB's managementhas indicated that decentralization is becoming necessary; without somedevolution of responsibility within the next few years, increasing congestionof the decision-making process could itself become the cause of ineffici-ency. Over the next four to five years, NEB should prepare for decentraliza-tion by (i) considering carefully the available approaches; (ii) developingthe absorptive capacity for coping with a major reorganization; and (iii) for-mulating detailed plans to implement whatever approach is chosen. Duringimplementation of the proposed project, the Bank will offer all possibleassistance in discussing the issues posed by decentralization and weighing theparticulars of alternatives being considered by NEB.

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3.01 As a first step toward developing within NEB the necessaryabsorptive capacity, the proposed project includes a provision of technicalassistance for enhancing the Management Services and Development Department(para. 3.08). More than 10 years ago, NEB formed this Department to serve asan in-house consultant regarding systems, procedures and organizationalmatters. Nominally, this unit is under the control of the Deputy GeneralManager (Administration); however, it was conceived as having auth-ority oversystemic and structural matters throughout the organization. The Departmenthas been functioning much more narrowly than had been intended, and haslimited its activities almost exclusively to diagnostic studies of systems andprocedures in use in other specific units.

3.08 As NEB moves toward decentralization, it will need a unitfunctioning effectively in the manner that this Department was originallyconceived. During planning for decentralization, the unit would act as acounterpart to external consultants and would consider technical means ofminimizing the dislocations resulting from reorganization. During thereorganization, it would be responsible for implementing new systems andprocedures and for formulating appropriate adjustments to existing systems andprocedures. After reorganization, it would monitor and adjust informationflows and internal communications to ensure that the new decision-makingprocess functions as intended. The proposed project contains a provision oftechnical assistance, which would be primarily interactional with NEB imple-menting changes recommended by the consultants on an on-going basis, aimed atenabling this Department to enhace its effectiveness. At negotiations, NEBagreed that it will (i) by June 30, 1987, begin formulating and implementingmeasures to enhance the Management Services and Development Detartment;(ii) by June 30, 1988, prepare a report summArizing the activities undertaken;and (iii) by September 30, 1988, discuss with the Bank those changes whichhave been made, and implementation according to an agreed schedule of thosemutually acceptable changes which are still pending. Outline terms ofreference for the consultants, which were discussed and agreed in substance atnegotiations, are included in Annex 7.

Human Resources Development

3.39 NEB's establishment and staffing as of December 31, 1985,distributed according to function, is shown in Table 3.1.

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Table 3.1: NEB: ESTABLISHMENT AND STAFFING ALLOCATED BY DEPARTMENT(As of December 31, 1985)

Approved FilledDepartment posts posts X

General Manager's DepartmentMaterials Management 915 741 8.

Accounts 535 516 96Audit 66 56 85Rural Electrification 872 1,025 118Advisory Staff 1 1 100

Administration 2,022 1,757 88Operations 20,270 19,780 98Development Planning 80 88 110Major Projects 981 1,008 103

Total 25,742 24,972 97

NEB's complement of staff appears appropriate and fill rates appear satis-factory. Moreover, the ratio of consumers to employees is now about 84 to 1,up from previous levels of about 75 to 1. However, NEB's management is con-cerned about certain quantitative and qualitative aspects of staffing. Itsmost important quantitative concern is the inadequate numbers of professional-or technician-level sanctioned posts in almost every department. NEB canaddress this matter but only gradually. In the short term, NEB is concentra-ting on providing enhanced training and career development prospects forpromising though less than fully qualified existing staff. At working levels,to meet pressing requirements, certain departments are carrying more thantheir approved complement of semiskilled and unskilled staff. In the longerterm, NEB is planning to reduce semiskilled and unskilled staff. Somemeasures being considered include subcontracting construction and maintenancework to private firms where appropriate.

3.10 During the past few years, NEB has sought to upgrade the technicalcapabilities of its middle-management and working level staff, especially inthe financial and accounting disciplines. In 1982, NEB constructed a TrainingInstitute to provide instruction in all phases of power utility operations.The institute is one of the largest of its kind in the world, with a staff of320 conducting about 230 courses for about 3,000-4,000 staff per year.Training is given to all new recruits and to many existing personnel; in everycareer stream participation in certain specified training courses is aprerequisite for promotion. More time is needed for the impact of thistraining effort to become assessable; however, the Bank is satisfied that thesteps WEB has taken in esta1olishing and developing the Training Institute arecomprehensive and appropriate.

- 11. -

3.11 In May 1985, to coordinate its quantitative and qualitativeapproaches to human resources concerns, NEB established a Human ResourcesDevelopment Unit. This unit falls under the overall jurisdiction cf theDeputy General Manager (Administration), while reporting directly to theDirector of Personnel Administration. This unit's objecti7e is improvement ofthe approaches, systems and procedures NEB uses in the acquisition, selection,development, deployment and management of human resources. The proposedproject provides for technical assistance in the form of an adviser to theHuman Resources Development Unit. Outline terms of reference, which werediscussed and agreed in substance at negotiations, are displayed in Annex 8.At negotiations, NEB agreed to retain, in accordance with terms of referenceacceptable to the Bank, an Adviser to its Human Resources Dsvelopment Unit.

Operation and Maintentance

3.12 NEB has been operating its plant and equipment properly andefficiently. It has been conducting regular maintenance within the stipulatedintervals; moreover, the standards it has observed for major maintenance aresatisfactory. Still, NEB has significant scope to achieve better plantefficiency and substantial cost reductions through further systematization ofits maintenance scheduling and practices. To this end, the proposed projectincludes a provision for the development and introduction of a computerizedMaintenance Management System for thermal and hydro power plants (para. 4.05).

Transmission, Distribution and Losses

3.13 NEB has developed extensive transmission and distributionnetworks. Most urban centers have comprehensive supply of electricity andnearly 65% of rural agglomerations are already electrified. Estimated trans-mission and distribution losses account for slightly less than 12% andauxiliary consumption accounts for about 5% of generation. While these levelsare reasonable, NEB has scope for improving efficiency by reducing theselosses. The transmission losses can be reduced through the grid reinforcementcomoonents of the Bank financed Eleventh Power Project (Loan 2438-MA) and theproposed project (para. 4.08); in turn, distribution system losses can beaddressed through a technical assistance being provided under the proposedproject (para. 4.02(e)(i)).

Load Dispatch

3.14 NEB has a central load dispatch system which is controlled from itsheadquarters complex. While the system currently functions satisfactorily,greater efficiency over a broader scope of operation can be achieved byupgrades to its hardware and software and by remodeling. The proposed projectincludes a provision for remodeling NEB's central load dispatch system(para. 4.06).

Materials Handling

3.15 NEB has believed, for some -ime, that it can substantially improvethe efficiency of its stores management systems. The stores contain numerousobsolescent items; many other items which are used are too plentifully stocked

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or too inaccessible in the stores. To begin improving the efficiency of itsstores management, NEB hap already introduced a program for computerizationand stock rationalization in its central store. Additionally, it plans tostudy the logistics of that store's operations and mazae adjustments as appro-priate. However, an even greater improvement in stores management is possibleby systematizing the stocks and logistics of the many stores at field loca-tions and by integrating those prospective systems with the ones in use at thecentral store. The proposed project includes a provision of technicalassistance for materials handling aimed at integrating the systems andlogistics in use at all stores. At negotiations, NEB agreed that it will(i) by June 30, 1987, begin developing and implementing a program to increaseits efficiency in materials handling; (ii) by September 30, 1988, complete theanalysis and discuss the primary conclusions with the Bank; (iii) according toan acceptable timetable, implement those mutually agreeable systems and proce-dures; and (iv) thereafter, maintain inventories at levels which are consi-stent with the systems and procedures which have been adopted. Outline termsof reference for the consultants, which were discussed and agreed in substanceat negotiations, are shown in Annex 9.

C. Financial Management

Accounting and Budgeting

3.16 NEB's accounting systems conform to modern power utilitypractices. For the accounts that are maintained at NEB headquarters,accounting applications such as general ledgers, payroll, inventory transac-tions, accounts payable, and accounts receivable for the Federal Territoryarea have been fully computerized. Otherwise, headquarters receives manuallyprepared data from field offices and uses the computer to compile the infor-mation and consolidate final accounts. Because of delays encountered by fieldoffices in preparing and transmitting accounting records and also the largenumber of errors in those records needing reconciliation at headquarters, NEBhas not been able to process accounting information from the field for use ona timely basis. In conjunction with the Eleventh Power Project (Loan 2438-MA), NEB developed a "Distributed Source Data Generation Project" which willpermit computerization of raw accounting data at field offices and directtransmission of the data to headquarters using computer equipment and telecom-munications networks. Although implementation of this mechanization efforthas been delayed, it is now fully designed; the hardware is being ordered;installation of the hardware should begin in 1987; and the system should befully operational by 1988. This effort should upgrade the quality andtimeliness of field accounts and enable headquarters to compile quarterly andannual accounts more quickly than before.

3.17 NEB prepares annual budgets for its capital and operating expend -tures. Periodically, reports are prepared enabling management to compareactual results against budgetted amounts. In principle, when actual perfor-mance differs substantially from the budget because of factors beyond manage-ment's control, the budget should be revised based on those variance analyses;in practice, however, MEB revises its budget periodically based on analysis ofavailable incomplete information. The budget process has been operatingsatisfactorily and should become even more effective after completion of theDistributed Source Data Generation Project.

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Cormercial Systems

3.18 During the past several years, NEB has streamlined its billing andcollection system. Bills, prepared in advance by district offices, arefurnished to meter readers who complete them at the consume:'s premises anddeliver them by hand to customers. Payment of bills can be made throughdistrict offices, post offices, and collection agents; the payments can eitherbe received directly against a bill or as part of a uniform payment system forall utility bills. Customers are given one month to pay their bills andrequired to maintain a guarantee deposit equivalent to about 60 days averageconsumption.

3.19 In principle, NEB is authorized to disconnect any consumer who hasnot paid his bill on time. However, because of delays inherent in the manualmaintenance of those customer accounts which are managed at field offices, aconsumer may be several weeks in arrears before the district office becomesaware of the delinquency. In some rare cases, delays in the transfer ofinformation has resulted in NEB disconnecting consumers after their paymenthas been received. Therefore, NEB prefers to remind customers of theirdelinquency and disconnect only when their arrears exceed their guaranteedeposits. In any case, including unread meter accruals, accounts receivableto the private sector should average between 40 and 45 days billings; theyhave been averaging 50 days in recent years. NEB expects to improve on thissatisfactory performance after completion of the Distributed Source DataGeneration Project, when data is more readily available and delinquents can bepursued more quickly. At that point, in conjunction with implementation ofthe proposed project, NEB will develop accounts receivable targets which it,together with the Bank, would monitor closely.

3.20 NEB follows the same procedures with government consumers that ituses in billing and collecting from private sector consumers. However, theresults are less satisfactory. In the past few years, NEB has taken numeroussteps to minimize the financial impact of this problem. Most importantly, NEBhas stopped using Government as an intermediary in the billing arrangementsbetween NEB and a large number of public consumers. This has substantiallyreduced the amount of Government billings and arrears. In 1985, sales togovernment consumers represented about llX of NEB's revenues and receivablesfrom government consumers were averaging about 90 days billings.lY AlthoughNEB has the authority to disconnect selectively delinquent governmentconsumers, it prefers to use high level moral suasion with parent ministriesof delinquent agencies, where possible using interventio,i from the Treasury.During negotiations, the Bank discussed with the Borrower methods and incen-tives to ensure the timely payment of bills by all consumers; this matter willbe pursued on an ongoing basis during implementation of the proposed project.

1/ The interest which NEB foregoes by carrying government receivables for anaverage of 40 days longer than private sector receivables is aboutM$700,000, or substantially less than one tenth of 1X of revenues.

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3.21 NEB has been keeping current in paying its creditors. For capitalconstruction, most contracts stipulate that NEB should remit payment within60 days of receiving an invoice. In practice, NEB has been realizing an aver-age payment period of 50 days for meeting these obligations. For most operat-ing purposes, payments are due within periods ranging from 14 days to 30days. In recent years, NEB has been realizing average payment periods of 17to 24 days for meeting these obligations. This performance is satisfactory.

Management Information System

3.22 During the past few years, NEB has developed an interim on-lineManagement Information System. While the system is integrated vertically, itis not integrated horizontally. As the scope of NEB's business grows, thesystem needs to become broader and the inputs from the various departmentsneed to become more consistent. NEB has the in house capability to conductthe necessary development effort to upgrade the system. During implementationof the proposed project, the Bank will review and discuss NEB's efforts toexpand and integrate its Management Information System.

Audit

3.23 According to law, all government owned Corporations and Boards arerequired to close their accounts within six months of the conclusion of thefinancial year and thereafter furnish the compiled accounts for audit by theAuditor General. Owing to a shortage of staff, the Auditor General hasdecided to retain external auditors to audit NEB's annual accounts; that auditwould then be subject to approval from the Auditor General's office. Duringthe past several years, the external auditors selected have included (i) PriceWaterhouse and Company to audit NEB's headquarters' and consolidated accountsand (ii) Hanafiah, Raslan, Mohamad and Partners to audit field officeaccounts; with NEB closing its books and compiling annual accounts within sixmonths of the end of the financial year, the auditors should be capable ofpioducing an audit within an additional three months. This arrangement hasbeen accepted by the Bank in connection with the eleventh power project (Loan2438-MA). At negotiations, NEB agreed that it will (i) furnish unauditedfinancial statements to the Bank within six months of the end of NEB'sfinancial year, and (ii) furnish audited financial statements, together withthe certification and long form report prepared by an acceptable auditor, tothe Bank within nine months of the conclusion of NEB's financial year.

3.24 As required under the ninth power project (Loan 1808-MA), NEBestablished a Corporate Audit Department which is directly responsible to theGeneral Manager. Its senior staff include aualified managers, engineers andaccountants and its responsibilities include auditing management and technicalfunctions as well as accounting operations. To strengthen the department,additional staff have been employed and various training programs have beenconducted using assistance from NEB's external auditors. This unit has beendeveloping its activities and functioning satisfactorily.

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Taxes

3.25 NEB has been exempted from paying income tax, development tax andcustoms duties, since January 1980; however, the exemption from income tax isscheduled to lapse after the conclusion of the 1986 financial year (August 31,1986). Thereafter, NEB will be liable to pay 45X of taxable income, which isdefined as net income minus the excess of statutory deductions over deprecia-tion. The statutory deductions are primarily related to gross fixed assets inservice and function as a substitute for accelerated depreciation.

Dividends

3.26 NEB is responsible for paying dividends to GOM. Under theElectricity Act, dividends in any year may not exceed 6% of paid-in capital;the exact amount is determined each year by NEB's Board of Directors. Becauseof financial constraints that NEB was experiencing at the time, no dividendswere declared in the financial years 1980, 1981 and 1982. A dividend of 5% ofpaid-in capital was declared in each of 1983, 1984 and 1985; however, NEBwithheld remittance of the dividend payments in an attempt to offset somegovernment consumer arrears (para. 3.20). As of appraisal, NEB expected topay the dividend for 1983 in the financial year ended August 31, 1986; andadvised that the payments for 1984 and 1985 would be remitted in 1987; thosefor 1986 and 1987 would be remitted in 1988; and NEB would remain currentthereafter.

Insurance

3.27 Since 1964, NEB has kept on retainer a firm charged with providingexpert advice regarding risk management. In turn, NEB has chosen to self-insure against minor risks while purchasing commercial coverage against majorrisks. NEB reviews its program of insurance each year to ensure that thesecoverages remain appropriate. These arrangements remain acceptable to theBank.

IV. THE PROJECT

A. Project Objectives

4.01 With the recent sharp decline in her traditional exports and foreignexchange earnings (para. 2.10), Malaysia is facing severe resource constraintsin the medium term future. In this environment, NEB's immediate concern is tomaximize the operational efficiency of its existing facilities and to optimizeits use of the country's energy resources. The proposed project seeks toachieve these objectives, through emphasis on improving the efficiency ofthermal power stations, replacing oil with natural g'as as the primary fuel forpower generation, introducing a more effective maintenance management systemfor thermal and hydro power plants, rationalizing the transmission system,modernizing system operation ard control, and furthering specificinstitutional and management capabilities.

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B. Project Description

4.02 The project includes the following components:

(a) Thermal Stations: Plant Rehabilitation and Conversion

(i) Rehabilitation of plant at (1) the Tuanku Jaafar power station(4x60 * 3x120 MW); (2) the Prai power station (3x120 + 3x30MW); and (3) the Sultan Iskandar power station (2x120 MW).

(ii) Conversion of 600 MW of plant at the Tuanku Jaafar powerstation and 240 MW of plant at the Sultan Iskandar powerstation from oil to oil/gas firing.

(b) Maintenance Management Systems for Thermal and Hydro Stations

Introduction of computerized maintenance management systems at theTuanku Jaafar, Prai, Paka, Sultan Iskandar, Port Klang and ConnaughtBridge thermal stations and at the Perak River, Cameron Highlandsand Kenyir hydro stations.

(c) System Control Improvements

ii) Modernization of NEB's existing national load dispatch centerincluding installation of necessary communication equipment.

(ii) Installation of three regional distribution control centers atPenang, Johor Baru and Klang to provide SCADA (supervisorycontrol and data acquisition) functions.

(d) Transmission Lines and Substations for Power Supply to Kuala Lumpur

Installation of about 72 km of 275 kV and 132 kV transmission linesand nine 275/132/33 kV and 132/33 kV substations, needed forrationalizing the power supply system, reducing system losses andimproving the reliability of supply for the rapidly growing area ofKuala Lumpur and its environs.

(e) Institutional Development

Provision of technical assistance to strengthien NEB's capabilitiesin the following areass

(i) distribution system planning, management, operation andmaintenance, construction, loss assessment and reduction(para. 3.13);

(ii) organizational efficiency through the conduct of a study toupgrade the management services department (para. 3.08);

(iii) materials management (para. 3.15);

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(iv) fixed assets accounting through the conduct of a fixed assetsinventory (para. 5.05); and

(v) human resources development (para. 3.11).

Thermal Station Plant Rehabilitation

4.03 The main items of plant rehabilitation for the three power stationsare listed in Annex 10. A substantial portion of work for the Tuanku Jaafarand Ptai power stations concerns revamping of the control and instrumentationsystems of the 120 MW units. This will permit shorter start-up and shutdowntimes, improved operational flexibility and reliability to meet the anti-cipated two-shift operation and reduced operating cost through monitoring ofplant parameters and functioning at optimum levels. The resulting estimatedimprovements in plant performance are indicated in Annex 23.

Conversion of Oil Fired Units to Oil/Gas Firing at Tuanku Jaffar andSultan Iskandar

4.04 Petronas' prospective gas pipeline projects for transporting gasfrom the east coast of Peninsular Malaysia to the west coast and to thesouthern tip of the peninsula, are expected to make gas available for theTuanku Jaafar and Sultan Iskandar power stations by 1990. The option to burnoil would be retained after conversion, as a fall back measure against failureof gas supply.

Maintenance Management Systems for Thermal and Hydra Stations

4.05 NEB proposes to install computerized maintenance management systemswith a view to (a) producing plant maintenance schedules; (b) retrieving basicplant technical data; (c) producing routine maintenance reviews; (d) control-ling stores inventory; (e) optimising labor resources; (f) issuing jobinstructions and procedures; and (g) monitoring budget expenditures. Theabove features would lead to more efficient and less costly maintenance andbetter plant availability. The computers will be: (a) Tuenku Jaafar, Praiand Paka thermal stations -- mini computer with 10-12 user terminals;(b) Sultan Iskandar, Port Klang, Connaught Bridge thermal stations -- supermicro computer with 3-5 user terminals; and (c) Perak River, Cameron Highlandsand Kenyir Hydro stations -- micro computer with 2-3 user terminals.

System Control Improvements

4.06 Upgrading the Exiscing National Load Dispatcb. Center (NLDC).Upgrading of the NLDC will cover installation of new computers with associatedhardware and necessary telecontrol systems. The upgraded system willincorporate: (a) Energy Management System (EMS) to achieve (i) onlineautomatic control; (ii) unit commitment; (iii) production costing;(iv) economic dispatch; (v) contingency analysis; (vi) spinning reservemonitoring; (vii) interchange scheduling; and (b) Advanced Power SystemSoftware (APSS) incorporating features such as (i) network configuration;(ii) state estimation; (iii) security assessment; (iv) dispatcher's load flow;and (v) online dispatcher's training simulator.

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4.07 Regional Distribution Control Centers at Penang, Johor Baru andKlang. Due to extensive distribution system expansions in the aforementionedareas the need has arisen for introducing computerized Regional ControlCenters to perform the Supervisory Control and Data Acquisition (SCADA) func-tions for the network in their jurisdictions and to communicate with theNLDC. The proposed control centers will achieve: (a) secure and safe opera-tion of the distribution network; (b) monitoring and control of distributionequipment; (c) handling of local district emergencies (faults); (d) supervi-sion and control of switching operations at tIe substations; and (e) inter-action with the NLDC.

4.08 Transmission Lines and Substations for Rationalizing Power Supply toKuala Lumpur. This project covers rationalization of the power supply systemin the rapidly growing area of Kuala Lumpur city and its environs. The systemwas designed by NEB using Westinghouse's Transmission Planning Softw.re (TPS),and is the least cost solution towards improving system reliability andreducing losses. It involves creation of a 275 kV ring to feed power into theexisting 132 kV system through new 275/132 kV substations. The projectrequires nine Gas Insulated Switchgear (GIS) substations, with a totalinstalled transformer capacity of 2,190 MVA (Annex 14). Particulars of thetransmission lines covered by the project are given in Annex 15.

C. Cost Estimates

4.09 Annexes 10-16 give detailed cost estimates for the project compo-nents. All costs are based on December 1986 prices; physical contingenciesare at 10%. The price contingencies which amount to about 4.5% of the basecost plus physical contingencies, are computed on the basis of the followingescalation factors:

Year 1987 1988 1989 1990 1991

Local cost escalation Z 3.0 1.0 1.0 1.0 3.5Foreign cost escalation X 3.0 1.0 1.0 1.0 3.5

4.10 Table 4.1 summarizes the project cost estimate. The estimate is netof taxes and duties (para. 3.25).

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Table 4.1: PROJECT COST ESTIMATE /a

M$ (miilions) US$ (millions) /b Foreign costLocal Foreign Total Local Foreign Total as X of total

Thermal power plantrehabilitation 7.9 33.1 41.0 3.2 13.3 16.5 80.6

Thermal power plantconversion from oil tooil/gas firing 6.4 26.6 33.0 2.6 10.6 13.2 80.3

Computerized maintenancemanagement system forthermal & hydro stations 1.5 2.4 3.9 0.6 1.0 1.6 62.5

System control improvements 9.0 50.2 59.2 3.6 20.1 23.7 84.8

Transmission systemrationalization 90.3 106.6 196.9 36.1 42.6 78.7 54.1

Consultancy services for thermalplant rehabilitation, distri-bution system planning,materials management,management services, fixedassets accounting and humanresources development 2.8 11.1 13.9 1.1 4.4 5.5 80.0

Total Base Cost 117.9 230.0 347.9 47.2 92.0 139.2 66.1

Physical contingencies (10S) 11.8 23.0 34.8 4.7 9.2 13.9 66.1

Price contingencies 5.7 11.6 17.3 2.3 4.6 6.9 66.7

Total Project Cost 135.4 264.6 400.0 54.2 105.8 160.0 66.1

Interest during constructionBank loan - 51.3 51., - 20.5 20.5 100.0Others - - - - - - -

Total Financing Required 135.4 315.9 451.3 54.2 126.3 180.5 70.0

/a December 1986 price levels.Th Exchange rate 1 US$ = 2.5 M$

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D. Financing Plan

4.11 The financing plan for the proposed project is shown in Table 4.2.

Table 4.2: FINANCING PLAN FOR THE PROPOSED PROJECT

Local Foreign Total PercentSource of funds -- (US$ million)----

World Bank 0 100.0 100.0 55NEB 54.2 26.3 80.5 45

Total 54.2 126.3 180.5 100

The proposed Bank loan of US$100 million will meet about 55% of the totalproject cost and about 79% of the foreign cost (including interest duringconstruction). NE8 will finance the balance 45% of the project cost frominternal cash generation.

E. Project Implementation, Procurement and Disbursement

Project Implementation and Consulting Services

4.12 Based on an indepth review of specific proposals for thermal plantrehabilitation and improvement in operating performance identified in separatestudies made by two consultants, Gilbert Commonwealth International and theTokyo Electric Power Services Co, an NEB task force developed a list of neces-sary equipment. However, NEB will be seeking consultancy arsistance fordeveloping detailed specifications and in supervising implementation of theseefforts. NEB has made its own studies of its load dispatch system and hasdeveloped detailed requirements for its modernization; moreover, it haspreviously engineered regional distribution control centers, and has preparedequipment specifications for the load dispatch center and the regional controlcenters. Feasibility studies have already been completed for rationalizingthe transmission system for 2upply to Kuala Lumpur; detailed equipment speci-fications have also been developed. Outline terms of reference, which wereagreed upon in substance during negotiations, have been drafted for technicalassistance relating to enhancement of -he Management Services and DevelopmentDepartment, human resources development, materials handling, fixed assetsaccounting and distribution system planning (Annexes 7, 8, 9, 20, 24). Atotal of 430 man-months of technical assistance for these various activitiesare envisaged. The break-up and cost estimates, including details of each ofthe major consultancies, are provided in Annex 16.

Procurement

4.13 Equipment and services fi.:suced under the proposed Bank loan wouldbe procured by Internatioral Competidive Bidding (ICB) in accordance with the

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Bank's procurement guidelines. Consulting services financed under the Bankloan would be engaged in accordance with the Bank guidelines. Under ICB,local manufacturers will be permitted to participate where appropriate and beeligible for a preference of 15% of the CIF cost of the imported goods or theprevailing custom duties and other import taxes, whichever is lower, in theevaluation of bids.

4.14 All bidding packages for goods financed by the Bank and estimated tocost over US$2,000,000 equivalent would be subject to the Bank's prior reviewor procurement documents. About 80% of the procurement documents are likelyto be reviewed. Most major equipment for the proposed project is expected tobe imported. Conductors for transmission lines, miscellaneous items likecontrol cables, etc., which are now available in the country and are of goodquality, and civil works for substations will not be financed by the Bankloan. These items will be reserved for local procurement through NEB's normalprocedures which are satisfactory.

4.15 The following major procurement packages are proposed for ICB:(a) thermal plant rehabilitation and conversion -- (i) control and instrumen-tation, (ii) conversion of boilers to gas/oil firing, (iii) miscellaneousrehabilitation equipment; (b) cen-ral load dispatch and control center equip-ment; (c) substations -- (i) switchgear, (ii) transformers; and (d) trans-mission lines including towers, insulators and erection works.

4.16 Table 4.3 summarizes the allocation of the proposed IBRD loan forprocurement of goods and services for different project components.

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Table 4.3: PROCUREMENT ARRANGEMENTS(US$ million)

Procurement MethodTotal

Project component ICB LCB Others NA /a Cost

Thermal plant rehabilitation 15.2 - - 3.6 18.8(15.2) (15.2)

Thermal plant conversion from oil tooil/gas firing 12.2 - - 2.9 15.1

(12.2) (12.2)Maintenance management system 1.1 - - 0.7 1.8

(0.4) (0.4)System control improvements 23.1 - - 4.1 27.2

(23.1) (23.1)Transmission system rationalization

-- lines 8.1 11.0 - 2.8 21.9(8.1) (8.1)

-- substations 41.0 22.7 - 5.0 68.7(37.0) (37.0)

Consulting services - - 5.2 1.3 6.5- (4.0) (4.0)

Total 100.7 33.7 5.2 20.4 160.0(*96.0) T0.0) (4.0) T(.0)(100.0)

Note: Figures in parenthesis indicate financing from the Bank loan.

/a Refers to NEB's expenditures for its own staff, administration andoverheads and miscellaneous local mater;als.

Disbursements

4.17 The Bank loan would be disbursed against (a) 100% of the foreignexpenditures of directly imported equipment and materials; (b) 100% of localexpenditures ex-factory of locally manufactured items procured through ICB;and (c) 100% of expenditures for consulting services.

4.18 Reimbursements of expenditures relating to contracts valued at lessthan US$200,000 equivalent would be made on the basis of statements ofexpenditure (SOEs). Documentation supporting the SOEs need not be submittedto the Bank but should be retained by NEB and made available for review by theBank supervision missions. To facilitate projcict disbursements, a SpecialAccount in a fully convertible currency will be established in a bank on termsand conditions satisfactory to the Bank. The authorized allocation to theSpecial Account is US$7.5 million, representing four months average projectexpenditure. Replenishments to the Special AccQunt would be made quarterly orwhenever the Account is drawn down by about 505 of the initial deposit.

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4.19 Retroactive fiaancing would be permitted to the extent ofUS$1.0 million equivalent, for payments made prior to the date of loanagreement, but after July 1, 1986.

4.20 Annex 17 gives the disbuvsement schedule for the proposed Bankloan. This is in line with the Bank's profile of disbursements for powerproj"4cts for the East Asian region.

Implementation Schedule

4.21 Annex 18 gives the implementation schedules for the various elementsof the project. All project components are expected to be implemented by1990. NEB will be the primary agency responsible for implementation of allproject components. Plant rehabilitation and conversion work will be super-vised by consultants. The contractor appointed for the maintenance managementsystem will install, test and commission the systems and train NEB's personnelin operating the systems. Transmission lines will be constructed on turn-keybasis by the contractor with NEB arranging for the necessary way leaves.Civil works for the substations will be entrusted to a few local contractors,while erection and commissioning of the switchgear and transformers will beundertaken by the equipment sui'pliers. Insallation and commissioning ofcomputer systems hardware and software for the NLDC and other distributioncontrol centers will be done by NEB engineers with supervisory assistance fromthe equipment suppliers.

Monitoring and Reporting

4.22 Satisfactory procedures for monitoring the progress of the projectin terms of physical execution and financial reports, have been agreed withNEB who will furnish quarterly progress reports.

F. Environment

4.23 The project is not expected to have any adverse environmentalImpacts. In fact, the rehabilitation of thermal plant would lead to lesspollution, especially in cases of conversion from oil to gas firing. The highvoltage substations proposed for Kuala Lumpur and the surrounding areas willbe of indoor GIS (Gas Insulated Switchgear) design, necessitated by spaceshortage. This design would be aesthetically more acceptable than large out-door substations. Transmission circuits will be placed underground wherenecessary. The control center equipmsants will be housed in existingbuildings.

V. FINANCE

A. Introduction

5.01 NEB conducts its financial affairs as though it were a corpora-tion. In that context, NEB has responsibility for maintaining satisfactoryrevenues, meeting its expenses and debt service, formulating and financing itsinvestment program (with guidance from GOM), and mobilizing resources for COM

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through payment of taxes and dividends.21 NEB has the legal authority to setor adjust its tariff; but it does not adjust the tariff in a manner contraryto 0OM policy.

B. Past and Present Financial Performance

5.02 NEB's finAncial performance for the period 1982-85 is displayed inAnnex 19 Key financial indicators for that period are presented inTable 5.1.

2/ In order to rcduce pressure for increasing revenues, 0OM elected toexempt NEB from paying taxes (para. 3.25) and remitting dividends(para. 3.26) during 1980-86.

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Table 5.1: SUMMARY OF NEB'S FINANCIAL PERFORMANCE, 1982-85

Financial Year ended Augusst 31 1982 1983 1984 1985-- Actual ---------------

Power sold (MkWh) 8,368 9,047 9.892 10,811Average revenue (Sen/kWh) 22.0 22.2 22.2 22.3Avg. Revenue - Constant prices 22.2 22.3

Operating revenue (M$ million) 1,842.4 2,013.1 2,199.6 2,403.5Tot. op. exp. & taxes (M$ million) 1,597.5 1,634.9 1,575.5 1,774.3Net operating income (M$ million) 244.9 378.2 624.1 629.2Net income after tax (M$ million) 255.2 /e 413.5 /e 654.2 /e 676.5 /eDividend (M$ million) 0.0 44.9 42.4 42.4Rate base (M$ million) 2,772.9 2,921.2 3,175.7 3,323.6

Primary ratios:Rate of ret. - Hist. assets 15.3% 26.8% 36.5% 36.3%Rate of ret. - Reval. assets 12.4Z 17.0% 24.1% 24.0%Self financing ratio /a 48.0% 50.7% 40.9% 47.1%Debt service coverage 3.6 4.2 3.9 2.7Debt/debt plus equity /b 44.5% 45.7% 44.8% 44.0%Dividend yield /c 0.0% 1.3% 1.0% 0.°%Operating ratio 86.7% 81.2% 71.6% 73.8%current ratio /d 119.6% 98.1% 110.5% 115.6%Accounts receivable - mos. 1.4 1.7 1.7 1.7Accounts payable - months 2.0 2.2 2.4 1.6

/a The ratio of cash available for investment divided by that specificyear's capital expenditure.

/b The ratio of long term debt divided by the sum of long term debt plusequity (net of any reserve for revaluation of assets).

/c The ratio of dividends to total equity (including reserves for revalua-tion of assets).

/d The ratio of current assets net of liquidity investments divided bycurrent liabilities net of overdrafts.

/e The anomaly of net income after taxes exceeding net operating incomeoccurs because NEB accounts for credits for transfers from thecontributions accounts as a non operating item. In these years, NEB hasbeen granted a tax holiday and the combination of non operating incomeand these transfers has exceeded interest charged to operations.

5.03 NEB has been a strong financial performer during the recent fouryears. This strong performance was the direct result of rate increases in1980 and 1981. Til'l then, NEB was slow in adjusting its rates to reflect theimpact of fuel price increases, particularly those resulting from the secondoil shock of 1979. Subsequently, after oil prices softened in 1984, NEBwaited to assess the likely impact of the trend before lowering its rates

- 26 -

twice during the current financial year (on September 1, 1985 and March 13,1986). Based on current rates, NEB's revenue is expected to average 20.3sen/kWh and 19.3 sen/kWh in the financial years ended August 31, 1986 and 1987respectively. Even at those lower levels, NEB is expected to show goodfinancial results (paras. 5.16-5.18 and TaWie 5.3).

Fixed Asset Accounting

5.04 During the past four years, NEB has re.orded astonishingly highrates of return on its fixed assets in operation (Table 5.1). This results,inter alia, from NEB's following excessively rigid fixed asset accountingrules. In effect, assets are not transferred from work in progress to grossfixed assets unless NEB headquarters receives completion certificates fromrelevant construction supervisors. Often, these certificates have beenreceived several years after revenue producing assets have been taken intocommercial operation. Thus, historically valued gross fixed sets inoperation might be understated by as much as M$1,400 million.3/ In addition,despite affirmations to the contrary from NEB's auditors, this practice mayhave led to understatements of depreciation, operation and maintenanceexpenses, and interest charged to operation, and also to a resultant over-statement of profits. Because of the tax holiday, NEB has not incurred anyfinancial liability related to overstating its profits; however, by over-stating its rate of return, NEB has aroused unrealistically high expectationsof its financial capabilities.

5.05 To provide a more accurate record of its rate base, NEB should firstascertain exactly which of its fixed assets have been taken into commercialoperation and which are properly still under construction. Then, it shouldintroduce accounting rules enabling it to take into the rate base a signifi-cant portion of those assets which have been placed in operation but for whicha completion certificate has not been received. The proposed project includesa provision for a review and update of NEB's fixed asset accounts aimed ataddressing both of these requirements. At negotiations, NEB agreed that itwill (i) conduct an inventory as of August 31, 1987 of its fixed assets, and(ii) incorporate the results of that fixed asset inventory into its annualaccounts for 1987. The proposed project includes a provision for NEB to hireconsultants to conduct this activity. Outline terms of reference, which werediscussed and agreed in substance at negotiations, are provided in Annex 20.

3/ Because of the difficulty in identifying the year of completion of eachof these assets, the past statements could not be recast to show theeffect of capitalizing them at the correct time. In the financialprojections (Annex 19), one-third of these assets were assumed to becap4'alized at the end of the 1986 financial year with the remainderbeing capitalized at the end of 1987. Thus, all rate of return figuresfrom 1988 onward are related to a properly computed rate base.Preliminary estimates for the years 1983-86 suggest that rate of returnon revalucl assets may be overstated by as much as 8% in each year.

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5.06 While its audited annual accounts record fixed assets valued athistorical cost, WEB does revalue its assets in memorandum form and providesthe result of that revaluation to the Bank annually. To conduct thisexercise, NEB uses a "fixed asset deflator" furnished to it by GOM. In turn,in developing this "deflator", GOM makes adjustments to the index for pastyears as well as deriving the new value for the current year; consequently, inits annual application of the new index, NEB has been making changes to itspast annual accounts. According to the proposed terms of reference, theconsultants conducting NEB's fixed asset inventory will be asked to review themethodology for using the "fixed asset deflator" and recommend whateverchanges are appropriate.

Liquidity

5.07 Under past projects, NEB has agreed to maintain its current ratio inexcess of 1.1 to 1. NEB has complied with this agreement in 1984 and 1985 andexpects to continue in compliance at the end of the current financial year.For purposes of this agreement, current ratio is defined as current assets netof investments of excess liquidity divided by current liabilities net of over-drafts. Originally, the Bank sought this agreement because NEB was experi-encing severe liquidity constraints. During the last four years, however, NEBhas enjoyed comfortable liquidity; in instances when it has encounteredperiodic cash constraints, NEB has enjoyed easy access to short term credit.Therefore, the Bank will waive agreement to current ratio targets in connec-tion with the proposed and past power projects in Malaysia. Instead, duringimplementation of the proposed project, the Bank will monitor closely those ofNEB's current accounts which reflect its operational efficiency. Aftercompletion of the Materials Handling Technical Assistance (para. 3.15),inventories will be compared with targets that are consistent with theconsultant's acceptable recommendations. After completion of computerizationof NEB's bi'ling and collection systems (para. 3.19), accounts receivable willbe compared with targets that can then be established and agreed as beingappropriate. Trade payables will be monitored to ensure that NEB continues tofollow current satisfactory practices (para. 3.21).

Foreign Exchange Exposure

5.08 As of August 31, 1985, NEB had long term borrowings exceedingM$3,050 million, of which more ttan M$2,700 million were denominated inforeign currency. As of that date, the current value of WEB's portfolio ofborrowings exceeded its book value by about M$77 million, or about 3%. In theintervening period, the Ringgit has weakened somewhat against the US dollar;and the Yen, the currency of NEB's primary exposure, has strengthened markedlyagainst the US dollar. Consequently, NEB risks realizing substantial foreignexchange losses during the next few years. NEB is taking steps to manage itsforeign exchange. Where possible, WEB is taking advantage of refinancingopportunities to reduce the cost and exposure of its existing foreign exchangeloans. Also, in order to plan and cushion the effects of foreign exchangelosses, WEB has been considering creating and maintaining an exchange stabili-zation reserve. At negotiations NEB gave an undertaking that it willintroduce into its year end accounts for 1986, policies and practices whichproperly reflect the impact of its foreign exchange exposure and which would

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be designed and implemented in accordance with international accountingstandards (while also being consistent with Malaysian accounting practices).

C. Tariff

5.09 NEB has adjusted its tariff twice during the current financialyear. The first adjustment, which was introduced on September 1, 1985, effec-tively reduced average revenues by about 10% by reducing mist rates almostequally. The second adjustment, which was introduced on March 13, 1986,effectively reduced average revenues by about 5% while giving certain selec-tive groups of large consumers discounts of between 10% and 20%. The tariffthat had been in effect until September 1, 1985; the tariff that had been ineffect between September 1, 1985 and March 13, 1986; and the tariff that iscurrently in effect are all displayed in detail in Annex 21.

5.10 When adopting the tariff that was introduced on September 1, 1985,NEB developed a structure of rates that represented a step toward long runmarginal cost, and levels of rates which were producing revenues similar tothose which would be expected from a long run marginal cost based tariff. Asa result of increases in plant efficiency and substitution of natural gas foroil as the primary fuel for NEB's thermal plants, the levels of long runmarginal cost are expected to decline. In the future, financial consider-ations will guide pricing decisions. During the next few years, NEB willattain its financial objectives even without increasing its tariff, thusactually dropping its rates gradually in real terms. Thereafter, to meet itsfinancial objectives, NEB projects maintaining the real value of its rates,coincidentally at levels consistent with long run marginal cost. Such atariff policy is acceptable.

D. Financing Plan

5.11 NEB's financing plan for the period of implementation of theproposed project, 1987-91, is provided in Table 5.2.

5.1' The proposed project, including interest during construction (andcommitment charges), represents only a modest 6% of NEB's investment programfor the period. The proposed Bank loan, which would be extended directly toNEB for a term of fifteen years (including three years of grace on repaymentof principal) and bearing the standard variable interest rate, is expected tomeet only 3% of NEB's total financing requirement for the period.

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Table 5.2: NEB'S FINANCING PLAN, 1987-91

M$ mln. US$ mln. Pct.

Internal Cash GenerationMet income before interest 5,390.4 2,156.2 72XDepreciation 2,681.8 1,072.7 36%Gross consumer contributions 747.5 299.0 101Net disposal of fixed assets 9.0 3.6 0%

Operating Cash Flow 8,828.7 3,531.5 117%

(Less) Working capital incr. 279.6 111.8 4%(Less) Taxes payable 1,498.4 599.4 20X(Less) Dividend payable 212.1 84.8 3X

Cash Avail. for Debt Service 6,838.6 2,735.4 91%

Debt ServiceInterest charged to operations 1,110.6 444.2 15XPrincipal repayments 1,988.3 795.3 26%

Total Debt Service 3,098.9 1,239.5 41I

Cash Avail. from Operations 3,739.8 1,495.9 50%

Capital InvestmentProposed Project 400.0 160.0 5%Other projects 6,478.2 2,591.3 86ZCapitalized interest 659.8 263.9 9%

Total Capital Investment 7,538.0 3t015.2 100%

Balance to be financed 3,798.2 1,519.3 50%

Sources of FinanceGovt. contributions - RE projs. 342.2 136.9 5%Consumer deposits 166.9 66.8 2%IBBD Lns. for ongoing projects 166.5 66.6 2%B Loan - IBRD Projects X & XI 125.0 50.0 2%IBRD Loan - Proposed Project 250.0 100.0 3%Committed and existing other loans 798.6 319.4 11%Further borrowings 1,949.0 779.6 26%

Total Finance 3,798.2 1,519.3 50%

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5.13 During the period, NEB expects to meet about 501 of its overallinvestment needs from internal cash generation. In addition, 7% of its finan-cing requirements would be met from other sources related to operations,including consumer deposits and government contributions for extending ruralelectrification distribution lines. In addition to the proposed loan, theBank expects to finance 2X of NEB's investment requirements through existingloans (Loans 2146-MA and 2438-MA) and assist in meeting another 21 of NEB'sfinancing requirements through arrangements for a B loan. That loan, which isexpected to close during Autumn 1986, would provide US$50 million to financeportions of both the tenth and eleventh power projects. Based on prelimin*ryresponses to the announcement, the B loan is projected as bearing a nominalinterest rate of 8.51 and a term of 15 years, including a grace period ofthree years on repayment of principal. About 11% of NEB's investment require-ments are expected to be met from other loans for which NEB has alreadyreceived commitments; the remaining 26% of NEB's investment program would befinanced by other loans for which sources have still not been confirmed. NEBis not expecting to encounter substantial difficulties in raising this neces-sary additional finance. Based on commercial terms which foreign lenders haverecently made available to NEB, these further borrowings are projected asbearing a nominal interest rate of 8.5X and a term of ten years, includingthree years of grace on repayment of principal.

5.14 Because its current debt/total capital (net of any reserve forrevaluation of assets) ratio is only 44% and it intends to meet only about 431of its investment needs from borrowings during the period, NEB projects thatequity will continue providing the majority of its capital for the foreseeablefuture. However, owing to its sizeable existing and projected foreignexchange exposure, substantial unfavorable variations in exchange rates couldsuddenly weaken NEB's capital structure. To ensure its continued financialviability, at negotiations, NEB agreed to forgo incurring additional debt ifsuch additional debt would raise NEB's total debt to more than 60% of totalcapital (net of any reserve for revaluation of assets). NEB has given, andconsistently complied with, similar assurances under past Bank projects.

E. Future Finance

5.15 Projections for NEB's financial performance for the period 1986-95,together with assumptions underlying those projections, are presented inAnnex 19. Key financial indicators are presented in Table 5.3.

5.16 Between now and 1995, NEB expects to consolidate the growth it hasundertaken during the recent few years. Through 1988, it expects to completethe substantial expansion, launched in the early 1980s, on the basis of growthprojections that were higher than were subsequently realized. From 1989-1992,NEB expects a period of modest investment (in real terms) while currentlyprojected growth in demand reduces reserve margins to reasonable levels. From1993 onward, NEB will begin a program of sizeable new investment in order tomeet new expectations of growth in demand.

5.17 Under past projects, NEB has given assurances that it would takesteps, including but not limited to increasing its tariff, to realize revenuessufficient to meet its cash operating expenses, all interest chargeable tooperations, debt repayment, income taxes, dividends payable and at least 30%

Table 5.3: PROJECTED KXY FINANCIAL INDICATOPS, 1986-95

Financial year ended Aug 31 1986 1987 1988 1989 1990 1991 1992 i993 1994 1995Projections --

Power sold (MkWh) 11,367 12,128 12,973 13,982 15,059 16,190 17,399 18,656 19,995 21,425Average revenue (Sen/kWh) 20.3 19.3 19.3 19.3 19.3 19.3 19.3 19.3 19.3 19.6Avg. revenue - Constant prices 20.3 19.0 18.6 18.5 18.3 17.9 17.3 16.7 16.1 15.8

Operating revenue (MS mln) 2,311.8 2,345.2 2,508.5 2,703.5 2,911.6 3,130.2 3,363.8 3,606.7 3,865.4 4,208.8Tot. op. exp. & taxes (M$ aln) 1,703.0 1,623.6 1,882.0 1,967.8 2,124.8 2,371.2 2,659.6 2,918.3 3,194.7 3,497.4Net operating income (M$ mln) 608.8 949.2 972.1 1,056.4 1,052.4 1,097.9 1,050.3 1,067.7 1,019.7 1,042.8Net income after tax (M$ mln) 597.2 709.9 608,6 703.2 751.1 736.2 673.5 679.2 681.3 708.7Dividend (M$ million) 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4Rate base (M$ million) 3,962.3 5,621.4 7,090.4 8,057.9 9,465.8 10,915.6 11,998.9 12,833.1 13,701.2 14,808.7

Primary ratios:Rate of ret.

- Hist. assets (X) 31.6 23.5 16.2 15.5 13.7 11.7 10.6 10.2 9.9 9.8 S

Rate of ret.- Reval. assets (%) 19.4 15.9 11.4 11.6 10.5 9.0 7.8 7.3 6.8 6.7

Seif financing ratio /a (x) 49.1 58.4 44.9 40.8 46.8 56.3 42.0 41.6 34.5 37.9Debt service coverage 2.7 3.1 2.4 2.0 1.8 2.0 1.8 2.0 1.9 1.9Debt/debt plus equity /b (X) 43.6 41.8 42.0 41.0 38.4 35.8 35.7 36.5 38.4 39.0Dividend yield /c (X) 0.8 0.7 0.6 0.5 0.5 0.4 0.4 0.4 0.3 0.3Operating ratio (%) 73.7 59.5 61.2 60.9 63.9 64.9 6R.8 70.4 73.6 75.2Current ratio /d (Z) 105.8 88.7 86.8 93.7 104.1 100.3 101.9 99.8 105.8 116.6Accounts receivable - mos. 1.7 1.6 1.6 1.6 1.5 1.5 1.5 1.4 1.4 1.4Accounts payable - months 1.7 1.8 1.7 1.5 1.4 1.4 1.6 1.7 1.7 1.5

/a The ratio of casb available for investment divided by that specific year's capital expenditure.T7 The ratio of long term debt divided by the sum of long term debt plus equity (net of any reserve for revaluation of

assets).Jc The ratio of dividends to total equity (including reserves for revaluation of assets).7_ The ratio of current assets net of liquidity investments divided by ctirrent liabilities net of overdrafts.

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of its average annual investment program.41 NEB has complied with thisagreement during the past four years and expects to continue doing so duringthe projection period. Therefore, at negotiations, NEB renewed this agree-ment. Also, at negotiations, WEB agreed further that, unless the Bank acceptsotherwise, it may incur additional debt only if a reasonable forecast of itsnet revenues after expenditures for each year during the term of the debt tobe incurred shall be at least 1.3 times NEB's projected debt service require-ment. NEB has complied and expects to continue complying consistently withthis agreement.

5.18 In complying with these agreements, NEB would continue its accept-able financial performance and would remain in sound financial health. Eitherthrough compliance with the 30% contribution to investment target or simplymaintaining the nominal value of rates where the previous year's tariffprovides net revenues sufficient to exceed that target, NEB would be selffinancing annually an average of 45X of its investment program during theperiod 1987-1995. At the same time, rate of return on revalued assets wouldaverage 10X; rate of return on historically valued assets would average 14%;and the debt service coverage ratio would average 2.1 (while never dippingbelow 1.8). Throughout the period, NEB should continue enjoying satisfactoryliquidity.

5.19 While the rate of return on revalued assets remains satisfactory onaverage throughout the projection period, that indicator does drop sharplythrough 1992 and remains at only marginally satisfactory levels thereafter.This trend reflects the drop in real terms in electricity rates. That drop inthe real value of rates is acceptable because the level at which rates areexpected to stabilize is compatible with long run marginal cost. Moreover,the other financial indicators suggest that even with lower real rates, dEBwill retain a strong base of equity capital and remain highly profitablethrough 1995.

VI. PROJECT JUSTIFICATION AND RISKS

A. Justification

6.01 The project addresses important operation and investment efficiencyissues. It includes several components whose justification is presentedbelow.

Rehabilitation/Conversion of Thermal Power Stations

6.02 Rehabilitation of thermal stations and introduction of computerizedmaintenance management, is aimed at achieving increasing capacity, higherefficiency, better plant availability and improved operational control, and

4/ The average of (a) its investment programs for (i) the immediatelypreceding year and (ii) the current year and (b) its expected investmentprogram for the next year.

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forms part of the least cost development planning of NEB. A major portion ofplant rehabilitation at Tuanku Jaafar and Prai thermal stations concernsrevamping of the entire control and instrumentation systems. These systemshave been operating very unsatisfactorily, with the tnits kept running byad hoc modifications and vigilant manual control. Hente, changing thesesystems is necessary not only for improved performance, but also for continuedsafe and reliable operation of the plant. Conversion of thermal plart fromoil to gas firing is imperative wherever gas becomes available, in view of thelarge differential in the economic cost of gas (M$3.5/IMMRTU on the west coast(para. 2.12)) and the projected cost of fuel oil (M$?.3/MMBTU, based onUS$120/ton). Tuanku Jaafar power station on the west coast and SultanIskandar power station in the south will be converted to gas firing by 1990,whereas Prai in the north will continue as an oil-fired station.

System Control Improvements

6.03 The telecontrol system and computers at the existing national loaddispatch center have serious capability limitations for performing theenvisaged functions for a growing system, apart from obsolescence, nonavail-ability of spares and poor response time. Renovating the NLDC is essentialfor efficient load dispatch and reliable system monitoring. Regional distri-bution control centers at Penang, Johor Baru and Klang will perform thesupervisory control and data acquisition functions necessary .or improvementin performance of the rapidly expanding distribution networks in these areas.

Transmission System Rationalization

6.04 While NEB has adequate generating capacity, there are severalbottlenecks in its transmission system leading to inefficient and oftenunreliable system operation. NEB has a substantial program, for strengtheningits EHV and HV transmissi n networks over the next five years. The proposedproject covers rationalization of an important portion of the transmissionsystem which is sssential for meeting the demands of the rapidly growing areaof Kuala Lumpur and its surroundings, with acceptable levels of reliabilityand reduced losses.

B. Economic Rate of Returu

6.05 The internal economic rate of return (IERR) has been comiruted fnrthe entire NEB's (1986-95) investment program as well as for ouch of theproject components for which an estimation of the cost and benefit streamscould be carried out. Evaluation of IERR for system control u:entars has notbeen attempted as benefits are not quantifiable; however, the benefits (in theform of more efficient dispatch of generating units, better system sneurityand faster restoration of service) are expected to fully justify the costs.

NEB's Investment Program

6.06 The IERR of NEB's (1986-95) investment program, based on "direct"benefits measured in terms of revenues, is about 12% (Annex 22), which ishigher than the opportunity cost of capital (10%). With the incorporation ofconsumer surpluses, based on the demand functions for various customer groups,

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the IERR increases to 22%. Sensitivity tests for higher and lower demandscenarios (Anne. 4) yield IERRs of 142 and 9% respectively.

Internal Economic Rate of Return for Project Components

6.07 The IERs of the project components have been computed in Annex 23and the results are summarized below:

Project Gomponent IE_

(a) Thermal power plant rehabilitation andcomputerized maintenance system

(i) Base case 19.8%(ii) With 20% increase in capital costs 16.2%(iii) With 25% reduction either in projected

electricity genieration or inprojected fuel prices 18.4%

(b) Conversion from oil to gas firing >100%(Pay back periodless than 1 year)

(c) Transmission lines and substations forsupply to Kuala Lumpur

i) Base case 13.9%(ii) With 20% increase in capital costs 12.2%(iii) With project delay of 2 years 11.0%(iv) With 20% lower demand realization 11.0%

6.08 The evaluation of IERRs for thermal plant rehabilitation does noctake into account the significant intangible benefits that would result fromincreased safety and reliability of plant operation and prolongation of planteconomic life. Thus the IERk values are conservative. Likewise, the evalua-tion does not consider the benefits of enhanced reliability and more efficientoperation resulting from rationalizing the transmission system for KualaLumpur, as quantification of these benefits is not feasible.

C. Risks

6.08 The project faces no substantial risks. There is a possibility thata delay in construction of the gas pipe line could delay conversion of TuankuJaafar and Sultan Iskandar to gas firing. However, as conversion will retainoil burning capability of the aforementioned plant, there is no risk of lossof generation. The economic rate of return on gas firing equipment is highenough to tolerate delays in gas availability. Right of ways for transmissionlines and plots for substations are already available for the projectcomponent for rationalizing supply to Kualua Lumpur; her.ce no delays areforeseen on this account.

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VII. AGREEMENTS AND RECOMMENDATIONS

Agreement with NEB

7.01 During negotiations, agreements were obtained from NEB regarding thefollowing:

(a) NEB will (i) by June 30, 1987, begin formulating and implementingmeasures to enhance the Management Services and Development Depart-ment; (ii) by June 30, 1988, prepare a report summarizing theactivities undertaken; and (iii) by September 30, 1988, discuss withthe Bank those changes which have been made, and implementationaccording to an agreed schedule of those mutually acceptable changeswhich are still pending (para. 3.08).

(b) NEB will retain an Adviser to the Human Resources Development Unit(para. 3.11).

(c) NEB will (i) by June 30, 1987, begin developing and implementing aprogram to increase its efficiency in materials handling; (ii) bySeptember 30, 1988, complete the analysis and discuss the primaryconclusions with the Bank; (iii) according to an acceptable time-table thereafter, implement those mutually agreeable systems andprocedures; and (iv) thereafter, maintain inventories at levels thatare consistent with the systems and procedures which have beenadopted (para. 3.15).

(d) NEB will (i) furnish unaudited financial statements to the Bankwithin six months of the end of NEB's financial year, and (ii)furnish audited financial statements, together with the certifica-tion and long form report prepared by an acceptable auditor, to theBank within nine months of the conclusion of NEB's financial year(para. 3.23).

(e) NEB will (i) conduct an inventory as of August 31, 1987 of its fixedassets; and (ii) incorporate the results of that fixed asset inven-tory into its annual accounts for 1987 (para. 5.05).

(f) NEB will forgo incurring additional debt if such additional debtwould raise NEB's total debt to more than 60X of total capital netof any reserve for revaluation of assets (para. 5.14).

(g) WEB will take steps, including but not limited to increasing itstariff, to realize revenues sufficient to meet its cash operatingexpenses, all interest chargeable to operations, debt repayment,income taxes, dividends payable and at least 30Z of its averageannual investment program (para. 5.17).

(h) NEB will, unless the Bank accepts otherwise, incur additional debtonly if a reasonable forecast of its net revenues after expendituresfor each year during the term of the debt to be incurred shall be atleast 1,3 times NEB's projected debt service requirement(para. 5.17).

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Undertaking from NEB

7.02 In the agreed minutes of negotiations, an undertaking was obtainedfrom NEB that it will introduce into its year end accounts for 1986, policiesand practices which properly reflect the impact of its foreign exchange expo-sure and which would be designed and implemented in accordance with interna-tional accounting standards (while also being consistent with Malaysianaccounting practices) (para. 5.08).

Recommendation

7.03 The project is suitable for a Bank loan of $100 million.to NEB.

ANNEX I- 37 -

MALAYSIA

ENERGY EFFICIENCY AND PLANT RIHABILITATION PROJECT

NEB's Actual Electricity Sales, Generation, Peak Demand, Installed Capacity and Number of Employees

FY65 FY70 FY75 FY80 FY81 FY82 FY83 FY84 FY85

Electricity Sales (GWh) 1 072.0 2,171.0 3,981.0 7 265.0 7 803.0 8 368,0 9 047.0 9,892.0 10 811.0Domestic 163.0 268.0 474.0 1,148.0 1,302.0 1,457.0 ,804.0 2,000.0 2 224.0Commercial 346.0 599.0 1,113.0 2,151.0 2,333.0 2,518.0 2,877.0 3,165.0 3,571.0Industrial 263.0 576.0 1,481.0 2,744.0 2,959.0 3,202.0 3,736.0 4,170.0 4,487.0Mining 280.0 352.0 303.0 294.0 285.0 285.0 488.0 463.0 427.0Public lighting 20.0 23.0 40.0 65.0 69.0 75.0 85.0 94.0 102.0Sales to PRHEP /a 0.0 353.0 570.0 863.0 855.0 831.0 57.0 0.0 0.0

Gross generation (CWh) 1I240.5 2,498.1 4,652.5 8,466.1 9,099.5 9 817.4 10 730.6 11,705.1 12 730 4Hvdro 370,7 927.9 ,789.2 l125.6 1,422.9 l,216.9 1,476.3 2,812.9 3,70035Oil 625.8 1,375.9 3,536.2 6,430.8 6,797.4 7,665.8 8,406.6 8,192.5 7,433.2Diesel 152.5 100.1 175.9 621.0 574.6 641.3 766.5 630.5 1,090.5Natural gas 0.0 0,0 0.0 0.0 0.0 0.0 0.0 0.0 1,097.1Bulk purchase 91.5 94.2 151.2 288.7 304.6 293.4 81.2 69.2 106.1

Peak Demand (MW) 155.0 364.0 693.0 1,427.0 1,541.0 1,637.0 1,638.0 1,978.0 2,148.0

Installed Capacity (MW) 300.8 663.9 734.3 2,047.6 2,177.5 29407.0 2,577.7 2,906.4 3 781.2Hydro =1 * 2 T6.4 BT.T 613.4 613.4 613.4 726 4 846 5 1 1467Oil 140.0 360.0 540.0 1,210.0 1,330.0 1,560.0 1,612.0 1,612.0 1,570.0Diesel 49.6 38.5 48.9 124.2 134.1 134.5 139.4 251.9 204.5Combustion turbine /b 0.0 0.0 0.0 100.0 100.0 100.0 100.0 260.0 260.0Combined cycle 600.0

Number of Consumers 314,050 458,967 704,377 1 258 477 1 390 128 1 537 647 1 806 781 1 965 162 2 124 676Domestic n.a. n.a. n.a. 1,062,679 1,180,866 1,316,127 1,548!599 1,687:594 1!832:406Commercial n.a. n.a. n.a. 191,059 204,175 216,351 250,649 270,033 284,165Industrial n.a. n.a. n.a. 2,830 2,993 2,962 4,175 4,041 4,274Mining n.a. n.a. n.a. 59 61 58 538 485 434Public lighting n.a. n.a. n.e. 1,850 2,033 2,149 2,820 3,009 3,397

employeesNumber of employees 7,899.0 9,405.0 11,331.0 19,248.0 21,144.0 22,137.0 24,285.0 24,882.0 25,144.0Consumers/employee 39.8 48.8 62.2 65.4 65.8 69.5 74.4 79.0 84.5Sales per employee (MWh) 135.7 230.8 351.3 377.4 369.0 378.0 372.5 397.6 429.9Employees/KW installed 26.3 14.2 15.4 9.4 9.7 9.2 9.4 8.6 6.7

/a Perak River Hydro Electric Project.

/b Combustion turbine operated on medium fuel oil.

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

NEB's Transmission and Distribution Facilities

FY65 FY70 FY75 FY80 FY81 FY82 FY83 FYR4 FY85

Transmission Lines (ckm)275 kV 0 72 157 372 488 733 813 813 1,161132 kV 380 830 982 1,879 1,922 2,120 2,176 2,343 2,51766 kV 329 498 534 572 581 618 761 861 761

Substations (Capacity in MVA)275 kV 0 0 860.0 1,940.0 2,480.0 2,660.0 3,3RO.0 3,380.0 4,680.0132 kV 279.2 1,122.2 1,512.2 2,885.0 3,775.0 3,965.0 4,445.0 4,843.0 4,963.066 kV 330.5 452.0 609.8 701.7 851.8 698.8 1,239.8 1,293.8 1,331.0 X33/22 kV 226.0 414.2 893.5 1,508.0 1,658.9 1,803.9 2,405.5 2,614.3 2,882.711 kV & below 425.6 763.4 1,401.9 3,050.8 3,292.2 3,300.2 3,785.2 4,253.4 4,716.1

Distribution Lines (ckm)33 kV 730 858 899 1,454 1,246 1,331 1,378 1,413 1,44522 kV 92 132 172 186 212 223 2,060 2,030 2,09811 kV 2,005 3,050 4,912 9,433 9,743 10,342 11,757 12,559 13,004Below 11 kV 388 360.2 301.2 440 522 540 726 764 817

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Forecast of NEB's Electricity Sales, Generation, Peak Demand & Installed Capacity

FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95

Energy sales (GWh) 11,430 12,128 12,973 13,982 15,059 16,190 17,400 18,656 19,996 21,426Net generation (GWh)/a 12,736 13,587 14,527 15,652 16,865 18,121 19,453 20,838 22,315 23,889

Generation Shares (%)Oil 62 60 43 26 13 1-2 1-2 1-2 1-2 1-2Hydro 22 20 20 18 17 17 15 14 13 12Natural gas 16 20 37 34 47 56-57 61-62 63-64 65-66 67-68Coal - - - 22 23 25 22 21 20 19 1

Load Factor (M) 67 67 67 68 68 68 68 69 69 69 '

Peak Load (MW) 2,233 2,377 2,539 2,734 2,938 3,152 3,379 3,614 3.863 4,127

Installed Capacity (MW) 4,173 4,173 4,173 4,741 4,921 4,921 4,921 5,171 5,453 5,699Oil 1,785 1,785 1,785 1,753 405 405 355 355 355Hydro 1,236 1,236 1,236 1,236 1,296 1,296 1,296 1,296 1,296 1,296Natural gas 900 900 900 900 2,548 2,548 2,548 2,848 3,148 3,448Coal - - - 600 600 600 600 600 600 600Diesel/combustion

turbine 72 72 72 72 72 72 72 72 54 0

/a Net of station auxiliary requirements.

I!

40 ANNE 4Table 1

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Forecast of Electricity Demand by Consumer Category: Base Case(MGh)

PublicYear Industrial Commercial Residential Mir_ng lighting Total

1986 4,669 3,721 2,415 455 105 11,367

1987 4,995 3,904 2,657 459 111 12,128

1988 5,388 4,095 2,901 471 117 12,973

1989 5,862 4,333 3,160 502 124 13,982

1990 6,392 4,581 3,433 522 130 15,059

1991 6,967 4,843 3,704 540 136 16,190

1992 7,589 5,119 3,990 558 142 17,399

1993 8,247 5,400 4,285 575 148 18,656

1994 8,957 5,698 4,594 592 154 19,995

1995 9,725 6,011 4,919 609 160 21,425

- 41 - ANNEX 4Table 2

MALAYSIA

ENERGY EFFICIENCY AND PLANT RERABILITATION PROJECT

Forecast of Electricity Demand by Consumer Category: Low Case(GWh)

PublicYear Industrial Commercial Residential Mining lighting Total

1986 4,749 3,820 2,472 455 105 11,601

1987 4,980 3,952 2,674 459 111 12,176

1988 5,247 4,108 2,888 471 117 12,831

1989 5,572 4,285 3,113 502 124 13,596

1990 5,938 4,491 3,352 522 130 14,433

1991 6,328 4,708 3,589 540 136 15,301

1992 6,744 4,935 3,839 558 142 16,218

1993 7,188 5,173 4,102 575 148 17,185

1994 7,660 5,423 4,377 592 154 18,206

1995 8,164 5,685 4,665 609 160 19,283

-42- ANNEX 4

*fTable 3

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Forecast of Electricity Demand by Consumer Category: High Case(G;Wh)

PublicYear Inoastrial Commercial Residential Mining lighting Total

1986 4,842 3,848 2,514 455 105 11,764

1987 5,198 4,032 2,763 459 111 12,563

1988 5,637 4,251 3,028 471 117 13,504

1989 6,160 4,523 3,312 502 124 14,621

1990 6,730 4,837 3,614 522 130 15,833

1991 7,327 5,173 3,913 540 136 17,089

1992 8,039 5,533 4,228 558 142 18,500

1993 8,777 5,918 4,563 575 148 19,981

1994 9,577 6,331 4,915 592 154 21,569

1995 10,443 6,773 5,287 609 160 23,272

- 43 - ANNEX 5

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

NEB's Lonm-Term Generation Expansion Program /a (1986-95)

Commissioning Incremental Totaldate capacity capacity

Month Year Plant (MW) (MW)

December 1988 Port Klang #3 (coal/gas fired) 300 4,441

July 1989 Port Klang #4 (coal/gas fired) 300 4,741

January 1990 Conversion of Connaught Bridge 300-180 4,861to combined cycle

June 1990 Sungai Piah (hydro) 60 4,921

January 1993 Combined cycle 300 5,221

June 1993 Oil-fired (retired) -50 5,171

February 1994 Combined cycle 300 5,471

April 1994 Gas turbines (retired) -18 5,453

March 1995 Combined cycle 300 5,753

May 1995 Gas turbines (retired) -54 5,699

/a Excludes additional capacity realization due to plant rehabilitation.Includes 300 MW of combined cycle plant at Paka and 600 MW of oil/gasfired capacity at Port Klang Phase I scheduled for cormissioning in 1986.

MALAYSIA - NAlIONAL ELECTRICITY BOARDORGANIZATION CHART

GENERALMANAGER

CORPORATEAUDIT

r I

DEPUTY GENERAL DEPUTY GEERAL DEPUTY CEERAL DEPT GEERALMANAGER FrOR I MANA'GER FOR I MAJNAGEER FOR MAAE AORIOPERATIONS ADMINISTRATION I DEVELOPMENT PROJECTS

PLANNING

FINANCIAL TRANSMISSION CHIEF CHIEF ENGINEER MATERIALS- GENERATION _ SECRETARY PLANNING SYSTEM ACCOUNTANT I RURATLIN MANAGEMENTPIROJECT I ELECTRIFICATIONj

SYSTEMS MANAGEMENT [ TECHNICAL THERMAL Jt IYDROOPERATIONS SERVICES PLANNING J PROJECTS ACCOUNTS PROGRAM

SPEVCIIAL HYORO 1DTDISTRIBUTION PERSONNEL CE PROJECTS PROCESSSIN;

AREA COMMERCIAL RESEARCH AND |MANAGERS M MANAGER DEVELOPMENT J ARCHITECT

- TRAINING

WORLD BANK 30660

- 45 -

ANNEX 7Page 1 of 2

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

NATIONAL ELECTRICITY BOARD

Management Services and Development Department-Corsultancy Study

Terms of Reference

Introduction

1. In the context of the World Bank financed Energy Efficiency andPlant Rehabilitation project, the National Electricity Board wishes to enhancethe effectiveness of its Management Service and Development Department. TheWorld Bank would finance the proposed consultancy. The World Bank will beinvited to review the consultant's report and make comments.

Objective

2. Taking into account the significant changes in the NationalElectricity Board (NEB) in the thirteen years since inception of the Manage-ment Services and Development (MSD) Department, review the Department's role,scope, objectives and operating particulars and make recommendations aimed atenhancing the Department's effectiveness.

Scope of Work

3. The consultant shall undertake the following:

(a) Review existing documentation and NEB's organizational requirementsto establish a formal definition of the role and scope of MSD,appropriate to the changed circumstances which have already occuredwithin NEB.

(b) Based on NEB's present circumstances and the definition of MSD'srole and scope, assist in the development of intermediate termobjectives for MSD.

(c) Review MSD's structural and organizational relationships with NEB'stop management. Where appropriate, make recommendations regardingchanges in MSD's structural or communications patterns.

(d) Review MSD's manpo,ir and technology resource base and evaluate itssufficiency to accomplish MSD's objectives. As appropriate, makerecommendations regarding adjustments to MSD's resource base.

(e) Review the analytical and presentational techniques currently beingused by MSD. To the degree possible, familiarize MSD with the mostmodern techniques in use in similar organizational units in other

- 46 -

ANNEX 7Page 2 of 2

enterprises world wide. Where appropriate, recommend the intro-duction of new analytical and presentational techniques.

(f) Review organizetional relationships between MSD and those unics forwhom MSD is providing service under a particular project. As appro-priate, make recommendations regarding changes that would enhanceinternal effectiveness in MSD's pattern of operations and com-munications.

(g) Review the salesmanship approaches followed by MSD when seekingacceptance and implementation of its findings. Familiarize MSD withthe salesmanship approaches in use in similar organizational unitsin other enterprises world wide. Where appropriate, recommend theintroduction of new salesmanship approaches.

(h) Assist MSD with the implementation of those recommended changes infunction, procedures, and techniques which NEB accepts. As appro-priate, provide training to MSD staff in the use of new systems,procedure and techniques.

(i) Identify new skills required by MSD staff and new techniques forwhich familiarization by MSD staff would be desirable. Makearrangements for acquisition of these skills and familiarizationwith those techniques.

j) NEB should be furnished with the following:

(i) An inception report to be prepared two months after mobil-ization, indicating the consultant's perception of MSD's role,scope and objectives and an outline of the consultant's futurework program for implementing this complete assignment.

(ii) An interim report, to be submitted within five months ofacceptance of the inception report, furnishing detailed recom-mendations for adjustments of MSD's operations and a workprogram to implement items (h) and (i) above.

(iii) A final report, to be submitted within one month of receipt ofcomments concerning the interim report from NEB's management,taking into consideration whatever decisions NEB's managementmakes regarding the acceptance or lack thereof of the interimreport's recommendations.

(iv) A concluding report, to be submitted within 12 months ofacceptance of the final report, discussing the effectiveness ofimplementation of the final report's recommendations andtraining of MSD's staff.

- 47 -

ANNEX 8Page 1 of 4

MALAYSIA

ENERGY EFFI%IENCY AND PLANT REHABILITATION PROJECT

Human Resource Development (HRD) Consultancy Sud

Terms of Reference

1. Objectives

The objectives of the study are: (a) to interpret the manpowerrequirements of the Board in line with it3 corporate objectives and plans;(b) to ensure the establishment and implementation of effectivs staff careerdevelopment policy and processes; (c) to secure maximum contribution ofexisting staff through effective policy of staff development, utilization,selection and placement; (d) to ensure coordination of human resourcedevelopment and utilization activities carried out by the various departaents;and (e) to promote greater commitment to organizational mission and goals,harmony in staff relations, and enrichment of work life.

2. Scope

The scope of services shall include development of:

(a) Systems

(i) Models for forecasting NEB's human resource requirements on5-10 year basis indicatiing the demand, supply and satis-faction levels under alternative recruitment strategies,for appropriate occupational categories;

(ii) A system of job classification based on job analysis andprescribed salary structures;

(iii) Refined system of career structure and job clusters in theBoard;

(iv) Guidelines and/or formulae for manning standards forstaffing and audit purposes;

(v) Records, formats, procedures and inforzation system tosupport the total human resource planning functions,including inventory skills, turn-over analysis, manpoweraudit; and

(vi) Trained and capable counterparts to take over implementa-tion and follow-up.

- 48 -

ANNEX 8Page 2 of 4

(b) Processes:

(i) Installation and implementation of revised performanceappraisal system/process to cover all categories of staffincluding managerial and professional;

(ii) Installation and implementation of career developmentplanning and counselling for managerial, professional andsupervisory staff;

(iii) Installation and implementation of goal-setting processesfor departmental, functional and managerial planning;

(iv) Introduction and operationalization of instruments,including aptitude tests, and psychological personalityprofiling of employees, for recruitment, selection anddevelopment purpoces;

(v) Introduction, facilitation and operationalization oforganization development (OD) interventions with a view toimprove communications, teamwork and problem solving skillsamong groups and individuals; and

(vi) Treined and capable counterparts to take over the implemen-tation and follow-up.

3. Job Specification (HRD System)

The expert will be assigned to work with NEB counterparts in furtherdeveloping, consolidating and implementing the HRD system. He will beresponsible for designing, developlag, implementing and documenting framework,policies, procedures, methods and format required for systematic andcoordinated human resources planning in NEB.

In particular he will:

(a) Formulate, develop and install a practical and effective system foranalyzing, classifying and identifying manpower resources in NEB forforecasting purposes, including categorization of skills and jobs interms of type and level, and identification of self-containedforecasting units requiring separate manpower forecats;

(b) Review the existing manpower inventory system and analysis ofdistribution/utilization by pay grade, age, sex, ethnic group,length of service, employment status, job classification, qualifica-tion, and other pertinent factors. Such an inventory must include adetailed analysis of individual skills and abilities covering allcategories of staff;

(c) Review And install a manpower audit system for systematic investiga-tion, lescription, evaluation, accounting of available humanresources. The audit will address, interalia, recruitment and

- 49 -

ANNEX 8Page 3 of 4

termination patterns, absenteeism, availability, age distribution,labor market trends, demographic factors, manning levels, and cost-effectiveness of HRD programs;

(d) Design, develop and implement models for forecasting manpowerrequirement based on projected demand and supply of manpower, andtaking into account prevalent u,npower environment, turn-over,organizational plans and other pertinent input;

(e) Formulate and establish criteria, guidelines and methodologies fordetermining manning levels for the main functions of NEB inparticular for distribution and generation departments/units;

(f) Develop and operationalize policies and strategies in manpowerrecruitment, selection, education and training, placement anddevelopment consistent with the overall objectives and strategies ofNEB;

(g) Advise the HRD Unit in particular and NEB management in general onrelevant measurer for enhancing human resources management;

(h) Coach and train staff of HRD Unit in the developrent, installationand operationalization of HRD systems;

-i) Conduct seminars/workshops for HRD Unit and other NEB staff on HRDsystems;

(j) Compile, and present to NEB management the necessary documents andreports and all aspects of the assignment, including progressreports; and

(k) Perform any other appropriate duties he many be called upon withinhis competence as a HRD System expert.

4, Job Specification (HRD Process)

(a) tornulate, design and implement performance appraisal systems andprocesses for appropriate categories of staff: managerial andprofessional, subprofessional, and technical and clerical staff;

(b) Formulate, design and implement career planning and counsellingsystems and processes for managerial, professional and supervisorystaff;

(c) Formulate, design end implement M43-type planning processes atdepartmental, functional and individual manager levels;

(d) Identify, and introduce appropriate instruments including aptitudetests, psychological/personality profiling and others for staffrecruitment, selection and development purposes;

- 50 -

ANNEX 8Pe 4 of 4

(e) Identify key orgauizational concerns in LLN and conduct/facilitatein collaboration with internal/external resource persons appropriateOD interventions or communications, team building, problem solvingand other key concerns as identified;

(f) Analyze, identify, interpret and document the corporate philosophy,values, objectives and strategies on HRD appropriate to the internaland external environments of the organization;

(g) Advise HRD Unit in particular and NEB management in general onrelevant measures for enhancing human resource management;

(h) Coach and train staff of HRD Unit on the philosophy, concepts,thesis, methodologies and practices of OD;

Mi) Conduct seminars/workshops for HRD Unit and other NEB staff on HRDprocesses;

,j) Compile and present to NEB management the necessary documents andreports on all aspects of the assignment, including progressreports; and

1k) Perform any other appropriate duties he may be called upon withinhis competence as a HRD Process expert.

- 51 -

ANNEX 9Page 1 of 2

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATCION PROJECT

Materials Handling Consultancy Study

Terms of Reference

Introduction

In connection with the World Bank financed Energy Efficiency andPlant Rehabilitation Project, the National Electricity Board (NEB) isretaining a consultant to modernize its materials handling systems andprocedures. The consultant's charges will be met from the proceeds of theWorld Bank loan; in turn, the World Bank will be invited to review theconsultant's progress and comment on the consultant's findings andrecommendations.

Objective

WEB is seeking consulting assistance in an effort to modernize itsmaterials handling systems and procedures. NEB is seeking to optimize itscapital investment in stocks and its cost of managing stores. In particular,NEB is seeking to develop and implement:

(a) An appropriate computerized stores information system;

(b) Proper logistic systems for the efficient handling of materials; and

(c) Efficient store keeping systems and procedures which include appro-priate levels of security.

Terms of Reference

1. Assist WEB in determining a hierarchy of stores. Those stores whichneed to carry sufficient stock levels to justify computerization and whichpossess logistical advantages should supply adjacent smaller stores.

2. Assist WEB in determining the comparative advantages of an onlinecomputerized system as opposed to a distributive system that employs physicaltransfer of data. In the event that the system to be chosen would be hybrid,assist NEB in determining which stores should use the online system and whichshould use the distributive system.

3. Assist NEB in determining hardware and software requirements basedon the computer system chosen as appropriate to WEB's needs. As needed,assist NEB in evaluating available off the shelf software, and adjusting thatsoftware to NEB's particular requirements.

- 52 -

ANNEX 9Page 2 of 2

4. Within each store, recommend layout, storage methods and handlingmethods that would minimize handling time and cost. In particular, recommendproper storage and handling methods for cable and poles, to minimize lossesaccruing from breakage of poles and deterioration of cable drums.

5. Study the logistics of transporting purchased materials (a) from thevendor to the regional stores; and (b) between stores. This study shouldinclude an assessment of available technology for materials handling and makerecommendations regarding NEB's use of containers, palettes, specializedvehicles, and any other categories of handling devices. To the degree thatNEB would purchase specialized devices, arrange for standardization of shapes,sizes and weight.

6. Assist NEB in preparing specifications and bid documents for thepurchase of specialized equipment to be used either in the stores or for thetransport of stocks.

7. Assist NEB in developing store keeping procedures. In particular,assist in evaluating reorder points, optimum order quantitie3, maximumquantities and the use of staggered deliveries from vendors. Also, assist indeveloping systems and procedures for the issue of stocks with emphasis on theuse of free issue of some low cost items so as to optimize the cost ofaccounting for stores.

8. Develop systems of stores security.

9. Design and manage the change over to the new materials managementsystem. During the change over, reduce the stocks of obsolete goods andmaterials based on a physical check and feed back from NEB personnel. TrainNEB's stores staff in the particulars of the new systems.

10. The consultant should inferface with any NEB study group or otherconsultant developing systems and procedures which might have an impact onmaterials handling. Specifically the maintenance management system beingdeveloped for power stations should be considered when establishing storekaep-ing procedures for those same power stations.

11. The consultant shall furnish period progress reports as NEB mayrequire.

- 53 -ANNEX 10

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Cost Estimate - Thermal Power Plant Rehabilitation(14 million)

Item Local Foreign Total

Tuanku Jaffar Thermal StationRehabilitation of air heaters; rehabilitationof high pressure heaters; modification ofdrains; improvement of condenser vacuum;improvement of burners; provision ofcontinuous chlorination 2.0 11.5 13.5

Rehabilitation of instrumentation 1.7 8.0 9.7

Subtotal 3.7 19.5 23.2

Prai Thermal StationRehabilitation of air heaters; rehabilitationof high pressure heaters; modification ofdrains; improvement of condenser vacuum;improvement of burners 1.5 7.3 8.8

Rehabilitation of instrumentation 1.3 5.5 6.8

Subtotal 2.8 12.8 15.6

Sultan Iskandar Thermal StationImprovement of condenser vacuum andmiscellaneous items 0.2 0.8 1.0

Administration and Overheads 1.2 - 1.2

Total Base Cost 7.9 33.1 41.0

Physical contingencies (10Z) 0.8 3.3 4.1Price contingencies 0.4 1.6 2.0

Total Project Cost 9.1 38.0 47.1

US$ million equivalent 3.6 15.2 18.8

- 54 -ANNEX 1 1

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Cost Estimate - Computerized Maintenance Management Systemfor Thermal and Hydro Plants

(M$ million)

Item Local Foreign Total

Group A: Tuanku Jaffar, Prai, Paka (Thermal)Computer hardware 0.3 0.8 1.1Software and training 0.2 0.3 0.5Administration and overheads 0.2 - 0.2

Subtotal 0.7 1.1 1.8

Croup B: Sultan Iskandar Port Klang,Connought Bridge (Thermal)Computer hardware 0.2 0.5 0.7Software and training 0.2 0.3 0.5Administration and overheads 0.1 - 0.1

Subtotal 0.5 0.8 1.3

Croup C: Perak River, Cameron Highlandsand Kenyir (Hydro)Computer hardware 0.1 0.3 0.4Software and training 0.1 0.2 0.3Administration and overheads 0.1 - 0.1

Subtotal 0.3 0.5 0.8

Total Base Cost 1.5 2.4 3.9

Physical contingencies (1OZ) 0.2 0.3 0.5Price contingencies 0.1 0.1 0.2

Total Project Cost 1.8 2.8 4.6

US$ million equivalent 0.7 1.1 1.8

- 55 -ANNEX 12

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Cost Estimate - Thermal Power Plant: Conversion from Oil to Oil/Gas Firin8(M$ million)

Item Local Foreign Total

Tuanku Jaffar Thermal Station

Gas-firing equipment for 3,60 MW units 1.2 6.8 8.0

Gas-firing equipment for 3,120 MW units 1.2 9.0 10.2

Miscellaneous station equipment 1.4 3.2 4.6

Administration and overheads 1.1 - 1.1

Total Base Cost 4.9 19.0 23.9

Sultan Iskandar Thermal Station

Gas-firing equipment for 2,120 MW urits 0.8 6.0 6.8

Miscellaneous station equipment 0.7 1.6 1.8

Administration and overheads 0.5 - 0.5

Subtotal 1.5 7.6 9.1

Total Base Cost 6.4 26.6 33.0

Physical contingencies (10X) 0.6 2.7 3.3

Price contingencies 0.3 1.3 1.6

Total Project Cost 7.3 30.6 37.9

US$ million equivalent 2.9 12.2 15.1

- 56 - ANNEX 13

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Cost Estimate - System Control Improvements(M$ million)

Item Local Foreign Total

National Load Dispatch CenterComputer hardware 0.6 5.7 6.3Software 0.3 2.8 3.1Administration and overheads 0.5 - 0.5

Subtotal 1.4 8.5 9.9

Distribution Cotntrol Centers - Penang, Johor Baruand KlangComputer hardware 2.0 22.0 24.0Software 0.3 3.7 4.0Communications equipment 1.6 16.0 17.6Civil works 2.7 - 2.7Administration and overheads 1.0 - 1.0

Subtotal 7.6 41.7 49.3

Total Base Cost 9.0 50.2 59.2

Physical contingencies (1OZ) 0.9 5.0 5.9Price contingencies 0.4 2.5 2.9

Total Project Cost 10.3 57.7 68.0

US$ million equivalent 4.1 23.1 27.2

-57 - ANNEX 14

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Cost Estimate - Substations for Transmission System Rationalisation

Transformers Switchgear (nos.) Cost (M$ million)Name No. Voltage MNA 275kV 32kV 33kV llkV Local Foreign Total

(kV)

Serdang 2 275/132 240 14 16 12 - 11.4 29.7 61.12 132/33 45

LLN headquarters 2 132/33 90 - 9 10 - 6.6 7.2 13.8

Bandar Tun Razak 2 132/33 90 - 9 12 12 8.0 8.2 16.2(Tet Lee) 2 33/11 30

Titiwangsa (Jalan Pahang) 2 132/33 90 - 7 12 - 7.7 6.5 14.2

Jalan Galloway 2 132/33 90 - 11 10 - 6.8 7.7 14.5

Pudu Ulu 2 132/33 90 - 12 12 - 8.0 9.5 17.52 33/11 30

Segambut 2 132/33 90 - 14 16 14 6.0 10.5 16.52 33/11 90

Kg. Lanjut - - - - 6 - - 0.7 2.4 3.1

D.C.A. Subang 2 132/33 90 - 7 12 12 5.0 7.4 12.42 33/11 30

Total Base Cost 60.2 89.1 149.3

Physical contingencies (10%) 6.0 8.9 14.9Price contingencies 3.0 4.4 7.4

Total Project Cost 69.2 102.4 171.6

MS$ million equivalent 27.7 41.0 68.7

Switchgears 6.6 58.4 65.0Transformers 4.1 23.9 28.0Control & auxiliary equipment 0.6 6.8 7.4Land and civil works 42.2 - 42.2Administration and overheads 6.7 - 6.7

Total Base Cost 60.2 89.1 149.3

Physical contingencies (10%) 6.0 8.9 14.9Price contingencies 3.0 4.4 7.4

Total Project Cost 69.2 102.4 171.6

US$ million equivalent 27.7 41.0 68.7

-58 - ANNEX 15

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Cost Estimate - Transmission Lines for Tranmission System Rationalization

CostVoltage Route length Local Foreign Total(kV) (km) (M$ million) ----

Segambut - KL (North) 275/132 7.5 3.9 2.2 6.1Segambut - Kg. Lanjut 275/132 11.0 6.1 3.3 9.4Segambut - Damansara Ht. -LLN headquarters 275/132 7.5 2.7 1.4 4.1

Serdang - Bandar Tun Razak 275/132 26.0 8.5 5.4 13.9KL (East) - Pudu Ulu -Bandar Tun Razak 275/132 16.0 7.8 4.7 12.5

Connought Bridge - Bkt. Raja 132 4.0 1.1 0.5 1.6

Total Base Cost 30.1 17.5 47.6

Physical contingencies (10%) 3.0 1.7 4.7Price contingencies 1.5 0.9 2.4

Total Project Cost 34.6 20.1 54.7

Equivalent US$ million 13.8 8.1 21.9

Towers, fittings and accessories - 14.5 14.5Conductors 9.8 - 9.8Earth wires with fiber opticcables 0.2 1.3 1.5

Tower foundations and erection 11.7 1.3 13.0Wayleaves and access 0.9 - 0.9Survey and compensation 0.7 - 0.7Stringing and commissioning 3.6 0.4 4.0Administration and overhead 3.2 - 3.2

Total Base Cost 30.1 17.5 47.6

Physical contingencies (10%) 3.0 1.7 4.7Price contingencies 1.5 0.9 2.4

Total Project Cost 34.6 20.1 54.7

US$ million equivalent 13.8 8.1 21.9

- 59 - A:RNEX 16

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Cost Estimate - Consultancy Services(M$ million)

Man-Item months Local Foreign Total

Thermal power plant rehabilitation includingconversion to gas firing (studies anddetailed engineering) 160 0.4 4.0 4.4

Distribution system planning 60 0.4 1.5 1.9

Management services 40 0.2 0.6 0.8

Materials management (studies and relatedhardware) 80 1.2 3.8 5.0

Fixed assets accounting 50 0.6 0.2 0.8

Human resources development 40 - 1.0 1.0

Total Base Cost 430 2.8 11.1 13.9

Physical contingencies (10%) 0.3 1.2 1.5

Price contingencies 0.1 0.6 0.7

Total Project Cost 3.2 12.9 16.1

US$ million equivalent 1.3 5.2 6.5

- 60 - ANNEX 17

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Disbursement Schedule

Disbharsement (USs million) /aBank fiscal year Semester Semester Cumulative

1987 II 1.0 1.0

1988 I 6.0 7.0II 10.0 17.0

1989 I 13.0 30.0II 13.0 43.0

9990 I 11.0 54.0II 11.0 65.0

1991 I 8.0 73.0II 7.0 80.0

1992 I 6.0 86.0II 5.0 91.0

1993 I 5.0 96.0II 4.0 100.0

/a Reference: Updated Disbursement Profiles for Use in Appraisal Reports -Memo from PPDDR dated October 3, 1985. Profile refers to Region'sSpecific Investment Loans for the Power Sector.

- 61 -ANNEX 18Page 1 of 2

MALAY'SIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Project Implementatioui Schedule

_________ ImplementationKey Activities 5tart Complete

A. Thermal Plant Rehabilitationand ConversionAppointment of Consultants September 30, 1986 June 30, 1987Engineering and Bid Documents June 30, 1987 November 30, 1987Evaluation of Bids by NEB March 30, 1988 June 30, 1988Review of Evaluation by Bank June 30, 1988 July 15, 1988Contract Finalization by NEB July i5, 1988 October 15, 1988Equipment Deliveries April 1, 1989 June 30, 1989Installation and Supervisionby Consultants June 30, 1989 November 30, 1990

B. Maintenance Management SystemsEngineering and Bid Documents September 30, 1986 January 30, 1986Evaluation of Bids by NEB March 30, 1987 June 30, 1987Review of Evaluation by Bank June 30, 1987 July 15, 1987Contract Finalization by NEB July 15, 1987 October 15, 1987Installation of System andTraining January 30, 1988 March 30, 1988

C. System Control ImprovementsEngineering and Bid Documents September 30, 1986 March 30, 1987Evaluation of Bids by NEB July 30, 1987 November 30, 1987Review of Evaluation by Bank November 30, 1987 December 15, 1987Contract Finalization by NEB December 15, 1987 March 30, 1988Equipment Deliveries June 30, 1988 December 30, 1988Installation and Commissioning September 30, 1988 December 30, 1989

Transmission System Rationalization

D. Substation EquipmentsEngineering and Bid Documents September 30, 19R6 Decembec 30, 1986Evaluation of Bids by NEB April 30, 198' September 30, 1987Review of Evaluation by Bank September 30, 1987 October 15, 1987Contract Finalization by NEB October 15, 1987 January 15, 1988Equipment Deliveries June 15, 1988 March 15, 1989Installation and Commissioning January 15, 1989 December 30, 1989

Civil WorksAppointment of Contractors by NEB September 30, 1986 Harch 30, 1987Construction June 30, 1987 June 30, 1988

- 62 -ANNEX 18Page 2 of 2

ImplementationKey Activities .Start Complete

E. Transmission LinesRoute Surveys September 30, 1986 June 30, 1987Way Leaves September 30, 1986 June 30, 1987Engineering and Bid Document September 30, 1986 December 30, 1986Evaluation of Bids by NEB April 30, 1987 August 30, 1987Review of Evaluation by Bank August 30, 1987 September 15, 1987Contract Finalization by NEB September 15, 1987 December 15, 1987Tower Spotting September 15, 1987 November 15, 1987Tower Erection and Stringing December 30, 1987 December 30, 1988Commissioning June 30, 1988 June 30, 1989

Consu,tancy ServicesF. Management Services

Appointment of Consultants December 30, 1986 June 30, 1987Discuss Report with Bank June 30, 1988 July 30, 1988Finalize Schedule forImplementation July 30, 1988 September 30, 1988

G. Human Resources DevelopmentAppointment of Expert December 30, 1986 March 30, 1987Carry out Assignment March 30, 1987 March 30, 1988Interim Discussion with Bank September 30, 1987 October 30, 1987

H. Materials HandlingAppointment of Consultants December 30, 1986 June 30, 1987Carry out Assignment June 30, 1987 June 30, 1988Final Discussions with Bank June 30, 1988 September 30, 1988Implementation by NEB September 30, 1988 September 30, 1989

I. Fixed Assets InventoryAppointment of Consultants March 30, 1987 August 30, 1987Carry out Assignment September 1, 1987 December 15, 1987

Jo Distribution System PlanningAppointment of Cousultants December 30, 1986 August 30, 1987Carry out Assignment August 30, 1987 August 30, 1988Final Discussions with Bank August 30, 1988 September 30, 1988Implementation by NEB September 30, 1988 June 30, 1990

-63- Annex 19

Page 1 of 20

MALAYSIAENERGY EFFICIENCY & PLANT RENABILITATION PROJECT

NATIONAL ELECTRICITY BOARD

ANNUAL FINANCIAL STATEMENTS

Table of Contents

Pne-

Key Financial Indicators 2Income Statement 3Flow of Funds Statement 4Balance Sheet 5Derivation of Average Tariff 6Annual Investment Program 7Capitalization Values 8Fixed Asset Formation 9Financing of Investment 10Borrowings Summary 11IBRD Loan Parameters 12Committed and Further Loans 13Sales and Generation 14Direct Cash Flow 15Taxes and Dividends 16Receivables and Payables 17Assumptions to Financial Projections 18

Natile Electricity BWd - knei Finuaial Statemts - 1 l2-IM 20-Ot-6

NILAVSIA

EERSM EFFICISCY & PLAIT K EM AILItATIA PROECT

NATINAL ELECTRICITY BARDW

AWAL FINANCIAL STATEIEITS

i2Y Fiuocial IndicatorsFiKcial Yar ELid Aq. 31 19 I93 1904 1 t6 1917 191 1919 I9 I9 I92 193 1994 1

--- 4ttw t i--- - --- kJtN iPOER SlU W ) 9368 047 992 1611 11367 12123 12973 1392 150l9 it 173" 19656 19995 2425AVERAS REEIE Smi&l) 22.0 22.2 22.2 22.3 20.3 19.3 19.3 19.3 19.3 19.3 19.3 19.3 19.3 19.6No. RE TNIT PRICES 22.2 22.3 20.3 19.0 18.6 18.5 18.3 17.9 17.3 16.7 16.1 15.9OPERTIMI REVERI tUS NiIlIiul 1842.4 2013.1 2199.6 2403.5 2311.8 2345.2 2508.5 2703.5 2911.6 3130.2 336.8 3606.7 3965.4 4200.9TMT. lIP. ESP. & TAIES in1 ni.) 1597.5 1634.9 155.5 1774.3 O1703. 1623.6 1692.0 1967.9 2124.0 2371.2 2659.6 2918.3 319.7 3497.4IET PERTIS INC1W A HI..) 244.9 378.2 624.1 629.2 608.9 99.2 972.1 1056.4 1052.4 I19.9 1050.3 1067.7 I019.7 1042.8NET IUICOE AFTER TAX INS Nit.) 255.2 413.5 654.2 674.5 597.2 709.9 609.6 703.2 751.1 736.2 673.5 679.2 681.3 706.7DIVIEIND Sto 1illi) 0.0 44.9 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 PrjKtedRATE BASE M lilio) 2772.9 221.2 3175.7 3323.6 3962.3 5621.4 7090.4 6057.9 965.8 10915.6 1198.9 1233.1 13701.2 14866.7PR1NARYRATIOS:I

RATE OF RET.- HIST. ASSETS 15.3? 26.9? 36.52 36.32 31.U6 23.52 16.2? 15.52 13.7? 11.71 10.6? 10.22 9.9? 9.9? 13.52RAltE F RET.- REWIL. ASSETS 12.4? 17.0? 24.11 24.0? 19.4? 15.9? 11.4? II.U? 10.5? 9.02 7.98 7.31 6.89 6.72 9.71SELF FIUNCIN RATIO 49.0? 50.? 40.9? 47.1? 49.1? 59.4? 44.9? 40.82 46.82 56.3? 42.0? 41.6? 34.5 37.9? 44.21DEBT swRim CBVEASE 3.6 4.2 3.9 2.1 2.7 3.1 2.4 2.0 1.9 2.0 1.9 2.0 1.9 1.9 2.1BTEwTim Pt EBS ITY 44.52 45.7? 44.9? 44.02 43.6 41.8? 42.0? 41.0? 38.4? 35.a 35.7? 36.5? 36.4? 39.0? 3.hDIVIDED YIELD 0.0? 1.32 1.0? 0.9? o. 0.n 0.6? 0.5? 0.5? 0.4? 0.4? 0.4? 0.3? 0.3? 0.5?OPERATIN RATIO 96.n7 8.2? 71.6? 73.8? 73.7% 59.5? 61.2? 60.9? 63.9? 64.9? 68.9? 70.4? 73.6? 75.2* 66.5?CURN RATIO 119.6? 93.1? 110.5? 115.6? 105.9? 98.1 86.9? 93.n 104.1? 100.31 1O0.9S2 ".8? 105.89 116.6? 99.11AccOuT RECIVABL - NOS. 2.4 1.7 1.7 1.7 1.7 1.6 1.6 1.6 1.5 2.5 1.5 1.4 2.4 1.4 2.1AOl S PaYaE - NNI 2.0 2.2 2.4 1.6 1.7 1.8 1.7 1.5 1.4 1.4 1.6 t.7 1.7 1.5 1.6

dp~~~~~~~~~~~~~~~~~~~~~~~ ,.fI

4 o 9~~~~~~~~~~~~~

- 65 -

National Eletricity oand - Anal Finanial Statment - 1912-19S5 20-ct-4

Incus Statut Page 3INS Iillion s f20

FinAnial Tear Ende . 31 1902 1903 1904 I195 198 1987 1988 199 I"O 199I IM 193 1"4 195tml -- rej~~~~~ections- -_-

Total knertion 011k) 9741 1065 11533 12531 1332 1423! 15227 16412 17676 19003 20422 21089 234U9 2514Lusset?) 17 192 17n 17n 17n 17n 1in 1in 172 172 1in in i72 171Nt kseratimn INkS) 9303 9985 9823 10741 11367 12128 12973 13912 15059 1410 17399n 1966 19995 21425Mt laWted Powr (Nk)h 65 62 69 70 0 0 0 0 0 0 0 0 0 0Pow Sold (tk) 936 08 047 92 10811 11367 12128 1273 13982 0 50 16190 173 1066 19 21425Avewae Roe n ikS) 22.0 22.2 22.2 22.3 20.3 19.3 19.3 19.3 1,.3 19.3 19. 19.3 19.3 19.6

Inco" froe Electricity Sales 1839.7 2008.9 2195.6 239.4 2307.5 2340.7 2503.0 269.5 2906.4 3124.7 338.0 3600.6 39.0 422.1met Revnue - Ehl. of Salu 2.7 4.2 4.0 4.1 4.3 4.5 4.7 5.0 5.2 5.5 S 0 64l 6.4 4.7

IIPERATIND REENE 1842.4 2013.1 219.6 2403.5 2311.9 2345.2 2508.5 2703.5 2911.6 3130.2 3363.0 3606.7 385.4 4208.0

OPERATIE EFEIIEE

Fuel 1154.0 1182.7 1066.9 1191.3 985.0 581.2 609.2 653.0 751.0 330.3 92.5 1072.5 1238.8 1395.5Bulk Purchass 52.8 16.3 10.2 13.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Otker Cash Operatiag Epoass 256.9 219.2 311.9 347.5 372.9 402.6 434.0 470.0 505.2 551.8 607.9 675.5 742.5 319.3Depreition 133.8 146.7 196.5 231.8 345.1 412.2 493.2 523.3 603.0 650.2 723.0 791.0 64.4 951.1

Total Operatinr Expease 1597.5 1634.9 1575.5 1774.30 1703.0 1396.0 1536.4 1647.1 165.2 2032.3 2313.5 2539.0 2045.7 3166.0

WIEINS S9W. 6' 244.9 376.2 674.1 629.2 408.8 949.2 972.1 1056.4 1052.4 107.9 1050.3 0U.7 1019.7 1042.8zz~mamaruu u21~ 32u28m3_az*2na2ums

OTHER ITNdS

Non-Operating Incme

Bout. Susidy - hur. Dieul 31.2 22.3 25.4 37.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Divided EarnIngs 0.6 1.1 0.9 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2Sndry Reipts 23.3 33.8 38.6 42.9 45.0 47.3 49.7 52.1 54.5 57.5 60.4 63.4 66.6 69.9

TOTAL.O OPERATI1 IKOiE 55.1 57.2 64.9 80.6 45.2 47.5 49.9 52.3 55.0 57.7 60.6 63.6 66.9 70.1

IET INC. EF. INIEIE6T TMU. 300.0 435.4 689.0 709.9 654.0 996.7 1022.0 1108.7 1507.4 1155.6 1110.9 .i31.3 1086.5 1112.9susmuumwmgmmin

INTEREST

Tal Inteet Paysovts 103.3 123.4 161.6 198.5 270.7 301.2 332.7 366.8 383.0 365.8 37.4 434.3 489.0 550.0ILes Interest Capitali2ed 15.3 40.6 50.7 76.7 98.9 116.6 130.0 137.4 138.4 137.5 131.4 17T.6 240.9 273.0

INTEREST £5388 TO 89151IIIlB 80.0 82.8 110.9 121.8 171.9 184.6 202.7 229.S 245.4 248.3 266.0 255.8 248.9 277.0

IKN 0EFilRE TRLASFR 212.0 352.6 57.1 588.0 482.1 912.1 019.2 879.3 862.0 *07.3 844.9 875.5 937.4 835.9

TIJISfR. FII CTRII. ACCT. 43.2 60.9 76.1 L8.5 115.0 125.4 134.9 144.6 154.7 16.9 174.8 183.0 19i.8 204.2

INC EFORE TAN & DIVIEND 255.2 413.5 654.2 617.5 57.2 93.5 954.1 1023.9 1016.7 107t.2 1019.7 1058.6 1030.4 1040.0- - -m m s r a a a n m2-3 ae_

Incme Ta 227.6 345.6 320.7 265.6 338.9 346.2 379.4 349.1 331.4

IET IBMlE OME TMN 255.2 413.5 654.2 676.5 597.2 709.9 608.6 703.2 751.1 736.2 643.5 679.2 681.3 708.7

Divdend 44.9 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4(ls) Adj. for Sal of Assts 0.1 10.1) 10.11 0.2 (1.53 (1.4) (1.31 11.2) (1.1) (1.0) 10.9) (0.8) (0.71 (0.6)(leo) AlJ. to Prow. Yuar (2.5)less) Idj. to Equity Acount (50.0)

NET INE 255.3 368.5 664.2 634.3 553.2 66.1 564.9 659.6 707.5 692.8 630.2 63. 6382 665.7

- 66 -

rational Electricity Brd - Annual Fiancial Statmnts - 1982-1995 2O-Ort-u

Flns of Funds Statuat Pap 4(111 Klillion) of 20

Finantial Year Ended Au. 31 1912 193 194 1985 1986 1987 19M Iffl 1990 1991 192 193 199I 1995

INTERNAL CASH EIERATISH

Net Incov before Interet 300.0 435.4 689.0 709.3 654.0 996.7 1022.0 1108.7 1107.4 1155.6 1110.9 1131.3 1086.5 1112.9Wprecition 133.8 146.7 186.5 231.0 345.1 412.2 493.2 523.3 603.0 r.0.2 723.0 791.0 864.4 951.1Bross Consur Contributions 109.7 155.6 151.3 106.4 105.3 125.0 137.3 14.4 160.4 175.5 194.3 215.2 238.4 264.0lnt Disposal of'fied Assets 1.6 1.7 1.7 1.4 1.5 1.6 1.7 1.8 1.9 2.0 2.1 2.2 2.3 2.4

RTIII CASH FLUO 545.1 739.4 1021.5 1049.4 1105.9 1536.4 1654.2 1782.2 1972.6 1983.3 2030.3 2139.7 2191.5 2330.4

(Les) Norking Capital Incr. (91.5) (146.4) 47.1 176.2 111.81 (190.5) (40.4) 1".2 264.7 14.8 17.2 (29.5) 9.9 284.0(less) tax"e ayele 0.0 0.0 0.0 0.0 0.0 227.6 345.6 320.7 265.6 338.9 346.2 379.4 349.1 331.4(lss) Dividend Payable 0.0 44.9 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4lests) Not Investnt in Subs. 0.0 (3.3) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

CXSI AVAIL. FOR DBT SERvICE 636.6 844.2 939.0 830.8 1075.4 1456.8 1306.6 1224.9 129.9 1587.2 1624.5 1747.4 1700.2 1672.6

DEBT ERVICE

Interest Chwged to Operation 88.0 82.8 110.9 121.8 171.9 184.6 202.7 229.5 245.4 241.3 266.0 255.8 249.9 277.0Principal Repaynnts 91.3 119.3 130.2 186.6 230.4 280.7 337.1 369.4 458.2 542.9 628.2 623.9 647.6 612.0

Total Dfet Service 17.3 202.1 241.1 308.4 402.3 465.3 539.8 598.8 703.'S 791.3 894.1 879.7 896.5 899.0

CASM AVAIL. F OPRATIONS 457.3 642.1 697.9 522.4 673.1 991.4 766.8 626.1 596.3 795.9 730.4 867.7 803.6 783.5

CAPITAL INVESTEIIT

Proped Pro jt 0 0.0 13.4 119.0 166.4 79.9 21.2 0.0 0.0 0.0 0.0Oter Projects 838.9 1222.8 1302.3 1215.9 1359.6 1588.0 1417.9 119.9 1030.6 1250.9 1572.3 1890.2 2041.7 1745.1Cpitalized Interest 15.3 40.6 50.7 76.7 98.9 116.6 130.0 137.4 138.4 137.5 131.4 178.6 240.9 273.0

Annual Capital Invstmet 854.2 123.4 1353.0 1292.6 1458.4 1718.0 1666.9 1494.7 1248.9 1409.5 1703.7 2068.8 2282.6 2014.1

BICETOBE FINANCED 396.9 621.3 655.1 770.2 785.3 726.5 0O.1 969.6 652.7 613.6 973.3 1,201.1 1,479.0 1,234.5

SOURCE OF FILIIE

Bovt. Contributin - RE Projs. 140.0 99.8 92.0 72.1 77.9 86.9 11.6 89.5 7.1 0.0 0.0 0.0 0.0 0.0Consuer Dits 27.0 32.9 28.8 29.5 28.4 28.8 30.8 33.2 35.7 38.4 41.3 44.3 47.4 51.7BiD Las for Ongoing Projects 26.8 i7.9 16.1 68.2 43.5 87.6 44.6 34.3 0.0 0.0 0.0 0.0 0.0 0.08Loun - IBProjects 11I 0.0 0.0 125.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0IBRD Lon - Proposed Project 0.0 6.6 70.6 116.6 51.6 4.6 0.0 0.0 0.0 0.0Coeitt d Existing Loans 303.5 487.5 605.7 562.0 W5il 470.8 252.2 58.6 17.0 0.0 0.0 0.0 0.0 0.0Fort sofe?du1r 160;0 33.5 30? 3 5529 4831 5723 SJ - 1163.0 144.0 120146nv rnt oftlyi *i 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0TOTAL flU S497.3 657.1 742.6 731.8 763.5 714.2 919.1 885.1 664.6 615.3 98.5 1207.3 1495.5 1253.1

Upqidity for Invnftd_t 53.1 34.5 0.0 4.4 20.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Uquidity Borrouins 0.0 0.0 (57.0) 0.0 0.0 (0.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (0.0)

CSH I. (0ICI.I FOR YEAR 47.3 1.3 144.5 (86.) (42.7 (12.4) 19.0 16.5 11.9 1.7 15.2 6.1 16.5 18.5OPENIN BALAIIIE 21.0 68.3 69.6 214.1 127.3 84.6 72.2 91.2 107.7 119.6 121.3 136.5 142.6 159.1

ILOS1119 8BALAME 68.3 69.6 214.1 127.3 04.6 72.2 91.2 107.7 119.6 121.3 136.5 142.6 159.1 177.6assa mes nag -- - -_- - - - - - - - -- - - -X

- 67 -

National Electricity Burd - Annual Finarcial Stateents - 1982-199 20-kt-86

alance Set Page 5NS PIllionl) of 20

k At August 31 1912 1993 1904 I95 196 I 198 1909 I"O 19I 1992 1993 1994 197

ASSETS

FlIED ASSETSRevalued Broas Fixed Assts 5218.6 559.7 6423.1 6941.1 5765.9 Il169.4 12961.6 14904.9 17192.6 19349.5 21275.1 23166.9 Z03.5 28046.3(LessAkcusulated Opreciation 1758.6 189.2 2090.2 2360.7 2879.8 3375.4 3899.4 445.6 5103.2 5929.0 656.5 7884.5 9021.8 10295.7(less) Total Contribitions 713.5 905.7 1077.4 1198.9 1353.0 1484.1 1591.2 1701.6 1802.6 1876.4 1965.0 2069.7 2191.9 2333.0

Revalued Iet Fixed Assets 2746.5 3095.9 3255.5 3391.6 4533.1 6709.8 7471.1 86U.7 10267.0 11544U. 12453.6 13212.7 14189.7 15427.6Vork in Progress 1905.6 2472.1 3325.6 4224.3 4413.8 3617.0 4001.7 3779.3 2787.5 2W.9 3121.8 4051.3 4920.8 5203.4

TOTAL fllED ASSES 4652.1 5567.9 6591.1 7615.9 9946.9 !0326.8 11472.8 12424.0 13074.5 18201.1 15575.4 17264.0 19110.6 20631.0

CURMElt AETSCash 68.3 69.4 214.1 127.3 84.6 72.2 91.2 107.7 119.6 121.3 136.5 142.6 159.1 177.iInveatories 208.8 235.6 309.3 357.9 438.3 520.6 550.9 629.2 687.7 774.0 851.0 926.7 1016.1 1121.9Fuel Inventories 72.0 59.6 72.0 89.8 65.7 38.7 40.6 43.5 50.1 55.4 65.5 71.5 92.6 93.0kccnts Receivable 200.1 283.1 308.6 337.4 318.0 316.9 332.9 352.2 372.2 392.5 413.7 434.8 456.6 486.9otbQr Rceivables 310.4 290.7 345.7 415.1 456.6 502.3 552.5 607.7 668.5 735.4 808.S9 98.8 978. 1076.7

TOTAL CURREt ASSETS 867.6 937.6 1249.7 1327.5 1363.2 1450.7 1568.0 1740.3 1899.1 2078.6 2275.6 2465.4 2693.2 2956.1_ :S :U88:3E_ :2 2:2s=zzw2uuU 1 _ #-

Investents in Subsidiaies 6.9 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6Liquidity lnvestsents 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0rr lr 2r S=S=#:#:=:t8 at s r : sSsarl

TOTAL ASSETS 5526.6 6509.1 7834.4 8947.0 10313.7 11781.1 1304.4 14167.9 14976.3 16283.2 17854.6 19733.0 21807.4 23590.7

LIA8ILITIES MD NET NORTHE--xzss= VE $Ms #rxt:

EGUITYOevt. of Malaysia Investment 898.4 998.4 848.4 848.4 848.4 848.4 849.4 948.4 940.4 848.4 848.4 948.4 948.4 848.4Retained Eanings 1076.4 1444.9 2109.1 2743.4 3296.6 3962.7 4527.6 5187.2 5894.7 6597.5 7217.8 7853.7 8491.9 9157.6Revaluation Reserve 1072.3 1066.7 1002.4 1147.6 1436.5 1600.9 1667.2 1743.3 1833.8 2211.6 2621.8 3073.7 3550.6 4066.9

TOTAL t NETlT 3047.1 3410.0 4039.9 4739.4 5591.5 6412.0 7043.2 7779.9 9576.9 9647.5 10693.9 l1M.9 12890.9 14072.9

191 LOan - Proposed Project 0.0 6.6 77.2 193.8 235.0 219.8 197.9 177.1 156.2 135.41815 Loans - Ongoing Projects 37.7 75.6 91.7 150.9 191.4 245.0 259.8 262.3 231.5 200.7 169.9 139.1 109.3 77.58 Loan - POWr I t II 0.0 0.0 125.0 125.0 125.0 125.0 125.0 112.5 100.0 87.5Preios Vorld Bank Lons 335.4 303.0 269.8 236.9 196.1 163.7 129.3 106.5 85.1 65.4 44.1 23.7 8.6 0.8Comeitted and Existing Loans 1339.5 1740.1 2238.8 2666.2 2942.5 31N9.0 3169.3 2923.6 2570.4 2148.5 1704.4 1350.1 1042.2 702.0Further Serroting 160.8 194.2 501.5 1042.9 1500.6 2023.3 2859.3 3837.2 5024.7 5946.2lless) Current Mlaturitin (129.1) (144.0) (201.61 (230.4) (280.71 (337.11 (349.4) 1458.2) (542.9) (620.2) (623.9) 1647.6) (612.01 (642.6)

TOTAL B6 IUSS 1593.5 1974.7 2398.7 2823.5 3200.1 3UI.4 3891.7 4195.9 4204.7 4153.4 4476.7 4992.1 5829.0 6386.8

CLRREWT LIADILITIESCurrent Maturities of L. T. D. 129.1 144.0 201.6 230.4 280.7 337.1 369.4 459.2 542.9 628.2 623.9 647.6 612.0 642.6Accunts Payable 301.3 364.5 442.5 317.0 335.6 355.4 354.6 346.0 328.9 371.1 436.5 500.8 549.2 538.4Provision for Incoe ta 23 6 23.6 23.6 0.0 0.0 227.6 345.6 320.7 265.6 331.9 346.2 379.4 349.1 331.4Provision for Dividend 21.9 66.9 106.8 127.3 84.8 42.4 42.4 42.4 42.4 4*.4 42.4 42.4 42.4 42.4Other Current Liabilities 249.6 356.6 356.6 473.6 587.7 673.1 694.7 689.8 643.0 698. 783.4 99.1 99ms 981.4

TOTAL CUIRRT LIAILIIES 725.5 955.5 1131.1 1148.3 1288.8 1635.6 1806.6 1957.1 1822.9 2072.1 2232.5 2469.3 2545.2 2536.2X*S23322*1u2223822* 22Z222222222322222212232UZ12333222*8232t

OtMER LIAbILITIESComer Deposits 123.7 156.6 185.4 214.9 213.3 272.0 302.8 336.0 371.7 410.2 451.4 495.7 543.2 594.0LiUqdity Sotwrriup 46.8 12.3 69.3 20.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

TUTAL OtIS LIADILITIES 170.5 168.9 254.7 235.8 243.3 272.0 302.8 336.0 371.7 41h.2 451.4 495.7 543.2 594.9

TOTAL LIAMS. AND NET UlIN 5526.6 6509.1 7824.4 8947.0 10313.7 11781.1 13044.4 14167.9 14976.3 16283.2 17954.6 19733.0 21807.4 23590.7_ _ " g~ums matsl hmut _ 2832m.sutUEtttSrmzlEtnEmr2mEElU _EU_ r _UsZZUUU

- 68 -

National Electricity Surd - Annual Financial Stateents - 1992-19W5 20-Oct-Sb

Derivation of Averae Tar.ff Page 6(RI Nilliost of 20

Financial Year Ended Aug. 31 1982 1983 1984 198 1986 1987 199B 1989 199 1991 19 ISS3 1994 IS5

us%$

RATE OF RETUIM2. =

EIPEN3ESFuel 1154.0 1182.7 1066.9 1181.3 985.0 581.2 609.2 653.0 751.0 930.3 982.5 1072.5 1238.8 13SS.5Bulk Perchases 52.8 16.3 10.2 13.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other Cash Operat*ng Expens 256.S 289.2 311.9 347.5 372.9 402.6 434.0 470.8 505.2 551.8 607.9 675.5 742.5 819.3DepreKiation 133.8 146.7 196.5 231.8 345.1 412.2 493.2 523.3 603.0 650.2 723.0 791.0 84.4 951.I

TOTAL OPERATINB EXPENSES 1597.5 1634.t 1575.5 1774.3 1703.0 1396.0 1536.4 1647.1 1859.2 2032.3 2313.5 2539.0 2845.7 3166.0Incee TaM 0.0 0.0 0.0 0.0 0.0 227.6 345.6 320.7 265.6 339.9 346.2 379.4 349.1 331.4

REENE IEEDED - OPERATIONS 1597.5 1634.9 1575.5 1774.3 1703.0 1623.6 1982.0 1967.9 2124.8 2371.2 2659.6 2910.3 3194.7 3497.4

AV8. FIXED ASSETS IN SERVICE 2772.9 2921.2 3175.7 3323.6 3962.3 5621.4 7090.4 8057.9 9465.8 10915.6 11998.9 12833.1 13701.2 14808.7

Kininus Rate of Return 8.89 12.92 19.72 19.9? 8.02 8.02 9.02 8.02 8.02 9.02 8.02 8.02 9 02 9.02NININUN SURPLUS REVENUE 244.9 379.2 624.1 629.2 317.0 449.7 567.2 644.6 757.3 873.2 959.9 1026.7 1096.1 1194.7

TOTAL REVEUE REQUIRED - ROR 1842.4 2013.1 2199.6 2403.5 2020.0 2073.3 2449.3 2612.4 2892.1 3244.4 3619.5 3945.0 4290.8 4692.1

CONTRIBUTION TO INVESTHEITTr: :: -:-::::::_:

CASH OPERATING EXPENSES 1463.7 1468.2 1399.0 1542.5 1357.9 993.8 1043.3 1123.9 1256.2 1392.0 1590.5 1748.0 1981.3 2214.9

OTHER OPERATIONAL REQUIREMENTSWorking Capital Incr. (Decr.) (91.51 (146.4) 47.1 176.2 (11.81 (I19.51 (40.4) 194.2 264.7 14.8 17.2 (29.5) 99.9 284.:Taes Payable 0.0 0.0 0.0 0.0 0.0 227.6 345.6 320.7 265.6 338.9 346.2 379.4 349.1 331.4Dividend Payale 0.0 44.9 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4 42.4Total Debt Service 179.3 202.1 241.1 309.4 402.3 465.3 539.8 598.8 103.6 791.3 894.1 879.7 896.5 889.0Invetnnts in Industry 0.0 (3.3) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

OTER OPERATING CASH REONTS. 97.8 97.3 330.6 527.0 432.9 544.9 887.4 1156.1 1276.4 1187.4 129.9 1272.0 1397.9 1546.9

TOTAL OMERATING CASH NEDS 1551.5 1585.5 171S.6 2069.5 1790.8 1528.7 1930.7 2280.0 2532.6 2569.4 2890.4 3020.0 3369.2 3761.7

AVERAE ANNUA. CAP. EXPENI. 931.0 1156.9 1303.0 1369.0 1489.7 1614.4 1626.5 1470.2 1384.4 1454.0 1727.3 2018.4 2123.2 2160.1(less) 1rs. Consuser Contribs. (109.7) (155.6) 1151.3) (i06.4) (105.31 1125.9) (137.31 1148.4) (160.41 (175.5) (194.31 (215.2) (238.41 (264.0)

NET AV6. ANU CAP. EXPEND. 821.3 1001.3 1151.7 1261.6 1384.3 1489.6 1489.2 1321.8 1224.0 1279.6 1533.0 I903.1 1884.8 1896.1

Ninimu Contrib. to Investeent 45.42 51.71 49.92 35.22 30.02 30.02 30.02 30.02 30.02 30.02 30.02 30.0 30.02 30.02IINIMIN SURPLUS CASH 373.0 517.7 573.7 444.1 415.3 446.6 446.8 396.5 367.2 393.6 459.9 540.9 565.4 568.8TTLEMERQ RE CTI :- 52103.2 293 2513.6 2261t 1= 2 27C 29 :29 4330.:

TOTAL REVEUE REQUIRED - CTI 1924.5 2103.2 2293.3 2513.6 2206.1 1975.3 2377.4 2676.5 2899.9 2953.0 3350.3 3560.9 3934.6 4330.5

TOTAL REVENUJE RE0UIREIIEllt 1924.5 2103.2 2293.3 2513.6 2206.1 1975.3 2377.4 2676.5 2999.9 2953.0 3350.3 3560.9 3934.6 4330.5

(lesslConser Deposits 27.0 32.9 28.9 29.5 29.4 29.8 30.9 33.2 35.7 38.4 41.3 44.3 47.4 51.7(less)Non-Operating Incoe 55.1 57.2 64.9 80.6 45.2 47.5 49.9 52.3 55.0 57.7 60.6 63.6 66.8 70.1flesslNet Revs. Evcl. of Sales 2.7 4.2 4.0 4.1 4.3 4.5 4.7 5.0 5.2 5.5 5.8 6.1 6.4 6.7

TARIFF REVE REWUIRED 1839.7 2008.9 2195.6 23W.4 2128.2 1894.5 22.0 2596.0 2803.9 2851.4 3242.7 3447.0 3814.0 4202.1

PowER gaLES 16me 8368 9047 9892 10811 11367 12128 12973 13982 15059 16190 17399 18656 1999S 21425

Necessary Avtrage Rvenuelkb 22.0 22.2 22.2 22.3 18.7 15.6 17.7 18.5 18.6 17.6 19.6 18.5 19.1 19.6

AVERAGE TARIFF (SelnkUb) 22.0 22.2 22.2 22.3 20.3 19.3 19.3 19.3 19.3 19.3 19.3 19.3 I9,3 19.6

Tariff Increatse (2) 0.91 -0.02 0.52 -9.0S -4.9t 0.02 0.0o o.o0 0.02 0.0Q 0.02 0.02 1.1tSelf Finaning atio 49.02 50.72 40.92 47.12 49.11 58.41 44.92 40.82 46.,8 56.3t 42.02 41.62 34.52 37.92Cash Available fotr i'nvestent

(lAfter t gUk. Cap. lncr .) 457.3 642.1 697.9 522.4 673.1 991.4 766.0 62.1 596.3 795.9 730.4 967.7 803.6 783.5S::':- :w=_ Zas#

- 69 -

National Electricity Board - Annual Finacial Statmnto - 1982-lSSS 20-Oct-96

Anoual ltvnttnt Progra Page 7(NS Nilcli) o4 20

Total Esbnd. lot. hEp.Financial fear Ended Rag. 31 Project Before 1915- 1915 1986 199 IM 1989 1990 1 IM 1993 1194 1995

Cost 19 Ifl lkt.l -- - -o;retions---_:: ss

Foreigt Escalation Rate 0.000 0.000 0.030 0.010 0.010 0.010 0.035 0.035 0.035 0.035 0.035Foreign Escalation factor 0.000 0.000 0.015 0.035 0.046 0,056 0 090 0.119 0.157 0.197 0.239

Local Escltiot Rate 0.000 0.000 0.030 0.010 0.010 0.010 0.035 0.035 0.035 0.035 0.035Local Escalation Factor 0.000 0.000 0.015 0.035 0.046 0.056 O.0 0.118 0.157 0.197 0.239

POMPOSED PRWOJ1roreign Cost Cuponent,

There. Plant Rehab. S Conv. 59.7 59.7 1.7 16.5 26.1 11.3 3.4System Control leprovesents 50.2 50.2 1.3 13.9 22.6 10.0 2.5Transeissimn Reinforce4mts 106.6 106.6 2.7 29.3 48.0 21.3 5.3Other Project Expenditures 13.5 13.5 0.3 3.7 6.1 2.7 0.7

Foreign Base Cost 230.0 230.0 6.1 63.3 103.5 45.3 11.9 0.0Physical Contingeny 23.0 23.0 0.6 6.3 10.3 4.5 1.2 0.0Price Contingency 11.6 11.6 0.1 2.4 5.2 2.9 1.0 0.0

Total Foreign Cost 264.6 264.6 6.9 72.0 119.0 52.7 14.1 0.0

Local Cost Component:There. Plant Rehab. I Conv. 14.3 14.3 0.8 5.0 5.0 2.7 0.9Systen Control Improvements 9.0 9.0 0.5 3.1 3.1 1.8 0.5Transmission Ruinforceants 90.3 90.3 4.5 31.6 31.6 18.1 4.5Other Project Expenditures 4.3 4.3 0.2 1.6 1.6 0.9 0.2

Local Base Cost 117.9 117.9 6.0 41.3 41.3 23.4 6.0 0.0Physical Contingency 11.9 11.8 0.6 4.1 4.1 2.3 0.6 0.0Price Contingency 5.7 5.7 0.1 1.6 2.1 1.4 0.5 0.0

Total Local Cost 135.4 135.4 6.6 47.0 47.5 27.2 7.1 0.0TOTAL PROPOSED PROJECT COST 400.0 400.0 13.4 119.0 166.4 79.9 21.2 0.0

#=:~z sr-= S -::=z2 _ =

OTHER PROJECTSHydroelectric Generation

Sungai Piah 324.4 3.6 320.8 5.0 6.3 90.9 112.3 80.1 36.3UluT Trenganu 0.0 0.0Dakun Hydroelectric Project 0.0 0.0Other Comitted Projects 911.5 484.9 426.6 102.4 95.3 154.9 74.1Other Projects 0.0 0.0

Total Hydro Bas Cost 1235.9 747.4 107.4 101.6 235.6 186.4 R0.1 36.3 0.0 0.0 0.0 0.0 0.0

Thermal BenerationPort tlang 1 906.7 454.1 452.6 240.0 142.9 60.0 9.7Port Klang 2 1204.5 103.4 1101,1 101.6 150.4 310.7 297.2 187.9 53.3Other Comiatted Projetts 1152.2 493.0 667.2 331.3 267.9 64.2 3.8Other Projects 2661.4 2661.4 12.6 65.0 193.0 319.0 410.0 515.4 598.0 559.4

Theral Projects Bas Cost 5924.8 4982.3 672.9 561.2 434.9 323.3 252.9 236.3 318.0 410.0 515.4 59S.0 559.4Small Diesel Generation 193.5 119.5 64.0 6.1 9.5 6.1 6.5 6.9 7.3 7.7 5.0 4.0 1.^ 2.0

Hajor Transmission ProjectsSouthera Grid Reinforcement 209.9 209.9 9.1 19.1 50.0 88.3 45.4High Voltage DC - Baksn 0.0 0.0

Total HaJor Transission 209.9 209.9 8.1 19.1 50.0 88.3 45.4 0.0 0.0 0.0 0.0 0.0 0.0Other Transmission 3073.3 435.6 2639.7 196.7 262.2 235.0 170.7 166.4 125.9 222.2 339.1 420.1 379.6 122.8

Urbaa Distribution 3387.6 279.9 3107.0 196.9 210.7 225.4 241.2 258.1 276.2 295.5 316.2 339.3 362.0 397.3Rural Distribution 1677.2 166.3 1510.9 91.3 155.7 155.7 155.7 155.7 132.9 132.8 132.9 132.0 132.8 132.8Projet Related Administration 906.2 75.2 731.0 15.3 40.6 79.6 73.1 70.1 72.5 76.9 76.9 75.0 75.0 76.0

otbhr Projects Base Cot 16500.4 13893.0 1294.7 1359.6 1422.3 1245.2 1035.5 8E7.3 1053.1 1279.0 1483.6 1550.4 1290.3

Physical Contingeacy 1123.9 1123.9 0.0 0.0 142.2 124.5 103.5 08.7 1O5.3 127.9 149.6 155.0 128.0Price Contingen 1364.9 1364.9 0.0 0.0 23.5 48.1 51.9 54.6 92.4 165.4 256.1 336.3 336.7

TOTAL COST - OTHER PROECT 1999.2 16381.9 1294.7 15.6 1590.0 1417.9 1190.9 1030.6 1250.9 1572.3 1990.2 2041.7 1745.1

A INESITEIT PROSRAN 19309.1 16781.7 1294.7 135S.6 1601.4 1536.9 1357.3 1110.5 1272.0 1572.3 1890.2 2041.7 1745.1rnSua *=gas& a u m u u u m m 8e m#

- 70 -

National Electricity Board - Annual Financial Statesets - 1982-1993 20-Oct-96

Capitalization Values Page 8(IN million) of 20

Total Expend. Tot. Esp.Financial Year Ended Aug. 31 Project Before 1985- 1985 1986 1987 1988 199 WO 1991 1992 1993 m 195

Cost 1985 1c (At.) I-----------------

Foreign Escalation Factor 0.000 0.000 0.015 0.035 0.046 0.056 0.080 0.118 0.157 0.197 0.239

Local Escalation Factor 0.000 0.000 0.015 0.035 0.046 0.056 0.080 0.118 0.157 0.197 0.23'

PROPOSED PREJECTThere. Plant Rebab. & Conv. 85.l 85.1 2.8 24.5 36.6 16.3 5.0 0.0Systee ControT Improvesents 68.1 68.1 2.0 19.2 29.6 13.7 3.6 0.0Transeission Reinforceents 226.3 226.3 8.0 69.3 91.5 45.0 11.6 0.0Other Project Expenditures 20.5 20.5 0.6 6.0 8.8 4.2 1.0 0.0

TOTAL PROPOSED PROJECT COST 400.0 400.0 13.4 11I.0 166.4 79.9 21.2 0.0ts*2211z2ZM MM22ga DS I SUff St 2S I SSSXAU S D D S

OTHER PROJECTSHydroelectric Generation

Sungai Piah 367.3 3.6 363.7 5.0 6.3 90.2 127.9 92.1 42.2 0.0 0.0 0.0 0.0 0.0Ulu Trengganu 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Da-un Hydroelectric Project 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other Comitted Projects 939.8 484.9 454.9 102.4 95.3 172.8 84.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other Projects 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total Hydro as Cost 1307.1 818.6 107.4 101.6 263.0 212.2 9.1 42.2 0.0 0.0 0.0

Thermal GenerationPort Klang 1 915.0 454.1 460.9 240.0 142.9 67.0 11.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Port Klang 2 1318.7 103.4 1215.3 101.6 150.4 346.9 338.4 216.1 61.9 0.0 0.0 0.0 0.0 0.0Other Co2itted ProjeKtt 1160.2 485.0 675.2 331.3 267.9 71.7 4.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other Projects 3389.1 3389.1 0.0 0.0 0.0 14.3 74.8 212.6 377.7 504.0 655.8 797.5 762.5

Thermal Projects 6ase Cost 6783.1 5740.6 672.9 561.2 485.6 368.1 290.8 274.5 377.7 504.0 655.8 787.5 762.5Sall Diesel Generation 192.7 119.5 73.2 6.1 9.5 6.8 7.4 7.8 8.5 9.1 6.1 5.1 4.0 2.7

Kajor Transmisuion ProjectsSouthern Grid Reinfortest 234.8 234.8 9.1 18.1 55.9 100.5 52.2 0.0 0.0 0.0 0.0 0.0 0.0Nigh Voltage DC - akun 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total lajor Transmission 234.8 234,8 8.1 18.1 55.8 100.5 52.2 0.0 0.0 0.0 0.0 0.0 0.0Other Transaission 3570.2 435.6 3134.6 196.7 262.2 262.4 194.4 191.4 146.2 263.9 415.6 534.5 499.9 167.4

Urban Distribution 4006.1 279.8 3726.3 196.9 210.7 251.7 274.7 296.8 320.8 351.0 368.7 430.5 476.7 527.9Rural Distribution 1943.6 166.3 1777.3 91.3 155.7 173.8 177.3 179.1 154.3 157.7 163.3 169.0 174.9 181.0Project Related Adeinistration 951.7 75.2 876.5 15.3 40.6 88.9 83.2 80.6 84.2 91.3 94.5 95.4 98.8 103.6

TOTAL COST - OTHER PROJECTS 18989.2 16381.8 1294.7 1359.6 1589.0 1417.9 1190.9 1030.6 1250.8 1572.3 1890.2 2041.7 1745.1~~~~~~=Zxx SMS82a2

ANWUAL INVESlEIIT PROGRM A 19389.1 16781.7 1294.7 1359.6 1601.4 1536.9 1357.3 1110.5 1272.0 1572.3 1890.2 2041.7 1745.1S3: 222Z2ZZ2 1 1s #3t 8 l 1 g t 5# A =S s _ _ .l S S

- 71 -

National Electricity owd - Annul Financial Statents - 1982-i95 20-Oct-86

Fixed Aset Foration Page 9(Ns Million) of 20

Finaacial Year Ended Aug. 31 1912 1963 199 1985 1986 198 1999 199 I0 1991 1992 1993 194 1995-I~~~~~~~~ cta- ------------------ --- ---- -Projetions-- --

HISTO-1RCAL VALUE

GRO llED ASSEtSOpen.ng 18aance 3029.3 3303.6 3995.1 4468.9 4879.4 6141.3 9650.1 926.3 11637.4 13872.1 15406.2 16639.0 17712.3 19179.4Add itins:

Cap talizations 290.9 696.9 49.5 393.9 1260.9 2514.9 1292.2 1717.1 2240.7 1540.1 1238.0 1139.3 1413.1 1755.5(ins,) Retireats (5.6) (5.4) (5.7) (4.4) (6.0) (6.0) (6.0i 16.0) (6.01 (6.0) (6.0) (6.0) (6.01 16.0)

fearl1 Increase 275.3 691.5 493.8 389.5 1262.9 2509.9 1276.2 1711.1 2234.7 1534.1 1232.8 1133.3 1407.1 1729.5miiWical Gross Fixed Assets 3303.6 3995.1 4499.9 4879.4 6141.3 9650.1 W26.3 11637.4 13872.1 15406.2 16639.0 17772.3 19179.4 20908.9

ACCIIILATED DEMECIATIOIIopening Balance 909.9 1039.5 1192.9 1364.7 1589.6 1820.8 2113.6 2482.1 2083.4 3358.7 3969.1 4425.9 5025.1 5669.8AnnUaI Depreciation 133.8 147.0 195.7 226.1 234.2 295.9 371.5 404.3 478.3 512.4 560.9 602.2 646.7 701.5(less) DrWc. tm btd. Assts (4.1) (3.6) (3.9) (3.2) (3.0) 3.) (3.01 (3.01 (3.01 (.) (3.0) 3.0) (3.01 (3.0)

Closing Balance - Historical 1039.5 1192.9 1364.7 1589.6 1920.8 2113.6 2482.1 2993.4 3359.7 369.1 4425.9 5025.1 5668.6 6367.3

CONGUKIER CMITRIWT13115Opening Balance 393.4 599.9 793.4 950.6 1040.6 1130.1 1241.2 1355.5 1471.4 1576.5 1610.1 1659.5 1725.4 1900.5Additions - Urban Distribution 109.7 155.6 151.3 106.4 105.3 125.9 137.3 140.4 160.4 175.5 194.3 215.2 238.4 264.0Additions - Rural Electrif. 140.0 91.9 92.0 72.1 77.9 96.9 9.96 99.5 77.1(less) Trans. to lcose Stunt. (43.2) (60.9) (76.11 (99.5) (93.71 (101.7) (111.7) (122.0) (132.4) (141.9) (144.9) (149.4) (1.3) (162.8)

Net Changes 206.5 193.5 167.2 90.0 89.5 111.1 114.3 116.0 105.1 33.6 49.4 65.9 93.1 101.2Closing Balance 599.9 783.4 950.6 1040.6 1130.1 1241.2 1355.5 1471.4 1576.5 1610.1 1659.5 1725.4 1809.5 1909.72232sz32z23233zz 2222:33232222282 82 222322 3-222222232 32223= 22222222222822=2t 322as2

NET FIXED AIS - HISTORICAL 1674.2 2028.9 2173.6 2248.2 3190.4 5295.3 6098.7 7282.5 6936.9 9920.0 10553.6 11021.8 1l1 .2 12631.9

REVALUATION

Realuation Factor 1.075 1.030 1.010 1.010 1.010 1.035 1.035 1.035 1.035 1.035Gross Fixed Assets:

Opening Balante 7461.7 9028.9 11685.0 13091.2 14952.9 17794.6 20026.7 22019.8 23977.7 26292.6Additions 1310.3 2546.4 1292.6 1719.7 2245.9 1560.9 1254.4 1153.1 1431.7 1759.9(los) Retiremnts (5.6) (5.4) (5.7) 14.4) (6.01 (6.0) (6.0) (6.01 (6.01 (6.0) (6.0) (6.0) (6.01 (6.0)

Revilued Gross Fixed Assets 5218.6 589S.7 6423.1 6941.1 9765.9 11569.4 12961.6 14904.9 17192.8 19349.5 21275.1 23166.9 25403.5 29046.3

Accuwulated Deprition:Opening Balance 2537.8 2966.2 3409.2 3939.4 4503.2 5281.0 6136.5 7096.5 9160.5 S337.6Annual Revalud Deprec. 133.8 146.7 186.5 231.8 345.1 412.2 493.2 523.3 603.0 650.2 723.0 791.0 964.4 951.1(les) lop. of Rttd. ssts (4.1) (3.6) (3.9) (3.2) (3.0) (3.0) (3.01 (3.0) (3) (O 3.0) (3.0) (3-0) (3.0) (3.0)

Revl. Arcuulated Depr. 1758.6 1899.2 2090.2 2360.7 2079.8 3375.4 3899.4 459.6 5103.2 5929.0 6856.5 7984.5 9021.8 10785.7232222222222232222 222 2222222222222222222 222222322##t2S_ 32_2 Z__CC 2S2222222222222222222222222C=CC2222C3C2a222

Conumers Contributions:opening Balante 1278.0 13 6 1499.0 1607.1 1719.6 1865.7 1942.0 2033.8 2142.2 2268.6Additions 190.1 216.0 227.1 239.1 239.7 178.6 197.7 219.0 242.5 268.6Transfers (43.2) (60.9) (76.11 (98.5) (115.01 1123.4) (134.9) (144.6) 0154.7) 1167.9) (174.9) (113.0) (192.8) 1204.2)

Reyal. Consuemr Contributions 713.5 905.7 1077.4 1188.8 1353.0 1484.1 15$1.2 1701.6 1802.6 1876.4 1965.0 2069.7 2191.9 2333.0

lET FIXED ASSETS - REVALUED 2746.5 30SS.9 3255.5 3391.6 4533.1 6709.8 7471.1 9644.7 10287.0 11544.1 12453.6 13212.7 14189.7 I5427.6C2z2z3C3Z22222S 2333 222m, :n3szu2_=====2=C## 2s8#22CC#Czz2==__3222 222222C-C 228523 #22

GROSS FIE ASSETS 5218.6 58S9.7 6423.1 6941.1 9765.9 11569.4 12961.6 14804.9 17192. 19349.5 21275.1 23166.9 2543.5 2046.3ACCWWLATEO DEPRECIATION 1758.6 1998.2 2090.2 2360.7 2879.8 3315.4 3899.4 4458.6 5103.2 5929.0 6856.5 7984.5 9021.8 10285.7CONSE COluTR1UtIS 713.5 905.7 1077.4 119888 1353.0 1494.1 1591.2 1701.6 1902.6 1876.4 1965.0 2069.7 2191.9 2333.0NlET FIED ASSETS IN T10TIN 2746.5 3095.8 3255.5 3391.6 4533.1 6709.8 7471.1 8644.7 10297.0 11544.1 12453.6 13212.7 14189.7 15427.6REVUATION RESERVE 1072.3 1066.7 1082.4 1147.6 1436.5 1600.9 1a67.2 1743.3 1833.8 2211.6 2627.8 3073.7 3550.6 4066.9ANIA DEPRECIATION 133.8 146.7 186.5 231.9 345.1 412.2 493.2 523.3 603.0 650.2 723.0 791.0 964.4 951.1AUK TRANES (43.2) (60.9) (76.1) (88.5) (115.0) (125.4) (134.9) (144.6) (154.71 (167.9) (174.8) (183.0) (192.08 (204.2)

11R INl PROGRESS2222223222222222=

Opening Balance 1332.3 1905.6 2472.1 3325.6 4224.3 4413.8 3617.0 4001.7 3779.3 2797.5 2656.9 3121.8 4051.3 4920.9dditions:

Construction 938.9 1222.8 1302.3 1215.9 1359.6 1601.4 1536.9 1357.3 1110.5 1272.0 1572.3 1890.2 2041.7 1745.1Interest Capitalized 15.3 0.6 50.7 76.7 99.9 116.6 130.0 157.4 138.4 137.5 131.4 178.6 240.9 273.0(lns) Capitalizations 280.9 696.9 49.5 393.9 1268.9 2514.8 1292.2 1717.1 2240.7 1540.1 1238.9 1139.3 1413.1 1735.5

Yearly Intrease 573.3 566.5 853.5 898.7 189.5 (796.8) 384.7 (222.4) (991.8) (130.6) 464.9 929.5 969.5 282.6mm IN PROMRESS 1905.6 2472.1 3325.6 4224.3 4413.8 3617.0 4001.7 377S.3 2787.5 2656.9 3121.8 4051.3 420.8 5203.4

222222222223222222 ___ __ 3223222222222__22__32__2__22__33__2____C 22232222222222222222222222

- 72 -

atio) Electricity ibod - Annual Fiscial Statents - 1982-1995 20-ct-86

Finaning of Investmnt Page 10INS million of 20

Fismial fear Endd Al. 31 1986 1987 1998 19 10 1991 1992 1993 1994 1995rjetion ti---

TOIAL CNIPtLIU CS 139. 1601.4 1536.9 1357.3 1115 1272.0 1572.3 1890.2 2041.7 1745.1INTEES CAPITALIZE 98.9 116.6 130.0 1137.4 138.4 137.5 131.4 179.6 240.9 273.0

TOTAL IlERE 145.4 1718.0 1666.9 1494.7 1248.9 1409.5 1703.7 2069.9 2282.6 2019.1

OSR= OF FINlii

ft. Cotrition - RE Prois. 77.9 96.9 88.6 89.5 77.1 0.0 0.0 0.0 0.0 0.0Consemer k its 28.4 29.8 30.8 33.2 35.7 38.4 41.3 44.3 47.4 51.7Cash Available frm lwration 673.1 991.4 766.8 626.1 596.3 795.9 730.4 867.7 803.6 783.5(lms Liquidity Reqeremmats 21.8 12.4 (19.0 (16.S" (11.9) (1.7) (15.21 (6.1) (16.5) (18.5)

INTIM SOURMES IF FIWME 801.2 1119.5 E67.2 732.3 697.2 932.6 756.5 905.9 834.6 816.7

LOM

Proposwd I80 Loan 0.0 6.6 70.6 116.6 51.6 4.6 0.0 0.0 0.0 0.0

1UD Loa - Ongoing Projects 43.5 87.6 44.6 34.3 0.0 0.0 0.0 0.0 0.0 0.08-Lon - Ongolag ProjKts 0.0 0.0 125.0 0.0 0.0 0.0 0.0 0.0 0.0 h,Comitted Borrowings 453.0 470.8 252.2 58.6 17.0 0.0 0.0 0.0 0.0 0.0Further Borroinp s60.8 33.5 307.3 552.9 483.1 572.3 947.2 1163.0 1448.0 1201.4

Total OtherLoan 657.3 591.9 729.1 45.8 500.1 572.3 947.2 1163.0 1448.0 1201.4

novormt of laysia Equity

TOTAL FINMJO 1458.4 1719.0 1666.9 1494.7 124.9 1409.5 1703.7 2068.8 2292.6 2018.1

- 73 -

National Electricity Boad - Annual Financial Statents - l982-1995 20-Ot-86

Dorrouings Sulary Page ItI1l N llien) of 20

Financial Yea Ended Aug. 31 19U 1987 1M 1989 M90 IS91 1992 1993 19S4 1995----- '--------------------- ----- Projections --------

LOAS Aggregate5t=tM IBRO Low Borr oving

PSUOE J8RD LOA1N555Opening Balance 0.0 0.0 6.6 77.2 193.8 235.0 218.8 17.9 177.1 156.2Additions 250.0 0.0 6.6 70.6 116.6 51.6 4.6 0.0 0.0 0.0 0.0Interest Expense- 0.0 0.0 0.0 0.0 0.0 0.0 17.1 15.4 13.7 12.0Capitalized Interest 0.0 0.3 3.5 11.2 17.6 18.7 0.0 0.0 0.0 0.0Amortization 0.0 0.0 0.0 0.0 10.4 20.8 20.8 20.0 20.8 20.9Closing Blanc 0.0 6.6 77.2 193.8 235.0 218.8 197.9 177.1 156.2 135.4

TOTAL 131W LiS - 011901K PM1S.Opmning Balance 150.9 181.4 245.0 258.5 262.3 231.5 200.7 19.9 139.1 108.3Additions 210.0 43.5 97.6 44.6 34.3 0.0 0.0 0.0 0.0 0.0 0.0Interest Expense 6.8 6.6 15.9 14.2 22.6 19.0 16.9 14.1 11.3 8.5Interest Capitalized 9.3 13.9 7.7 9.8 0.0 0.0 0.0 0.0 0.0 0.0Aortization 13.0 24.0 30.8 30.8 30.8 30.8 30.8 30.9 30.8 30.8Closing blance 191.4 245.0 258.8 267 3 231.5 200.7 169.9 139.1 108.3 77.5

PREVIOUS WORLD WUBAK LOANSOpening Balance 236.9 196.1 163.7 129.3 106,5 85.1 65.4 44.1 23.7 8.6Additions 0.0 0.0 0.0 0,0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Interest Expense 16.9 14.4 12.1 9.9 8.2 6.5 5.0 3.2 1.6 O.7Interest Capitalized 0.0 0.0 0.0 0.0 0.0 0.0 0° 0 0.0 0.0 0.0Aortization 40.7 32.4 34.4 22.8 21.4 19.7 21.3 20.4 15.1 7.8Closing Balance 196.1 163.7 129.3 106.5 85.1 65.4 44.1 23.7 8.6 0.8

a-LOAU - POW I & XlOpening Balantc 0.0 0.0 0.0 125.0 125.0 125.0 125.0 125.0 112.5 100.0Additions 125.0 0.0 0.0 125.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Interest Expense 0.0 0.0 5.3 10.6 10.6 10.6 10,6 10.1 9.0 9.0Interest Capitalized 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Amrtization 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.5 12.5 12.5Closing Balance 0.0 0.0 125.0 125.0 125.0 125.0 125.0 112.5 100.0 87.5

EXISTINS % CONNITED ICANOpening Bala 2666.2 2942.5 3189.0 3169.3 2923.6 2370.4 2148.5 1704.4 1350.1 1042.2Additions 1251.6 453.0 470.9 252.2 58.6 17.0 0.0 0.0 0.0 0.0 0.0Interest Expense 148.1 163.7 169.4 192.1 190.6 176.2 143.4 114.8 88.6 66.5Interest Capitalized 92.7 87.4 89.2 63.9 27.1 6.4 1.4 0.0 0.0 0.0Artization 176.7 224.3 271.9 304.3 370.3 421.9 444.1 354.3 307.9 260.3Closing BlaKce 2942.5 3189.0 :t69.3 2923.6 2570.4 2148.5 1704.4 1350.1 .042.2 782.0

FURTHER BORROWINGS*ning Balate 0.0 160.8 194.2 501.5 1042.9 1500.6 2023.3 2859.3 3837.2 5024.7Additions 6869.4 160.0 33.5 307.3 552.9 483.1 572.3 947.2 1163.0 1449.0 1201.4Interest Expense 0.0 0.0 0.0 12.7 13.4 35.3 72.9 98.1 124.7 181.4Interest Capitalized 6.8 1.1 29.6 52.5 93.6 112.4 130.0 118.6 240.9 273.0Aortizantin 0.0 0.0 0,0 11.5 25.4 49.7 111.1 195.1 260.5 279.8Closing Balance 160.8 194.2 301.5 1042.9 1500.6 2023.3 2859.3 3837.2 5024.7 5946.2

TOTAL LoANopening Balante 3053.9 3480.9 3798.6 4261.1 4654.1 4747.6 4781.6 5100.7 5639.7 6440.1Additions 7504.6 657.3 598.5 799.7 762.4 551.7 576.9 947.2 1163.0 1448.0 1201.4Interest Expense 171.9 184.6 202.7 229.5 245.4 248.3 266.0 255.8 248.9 277.0Interest Capitalized 98.9 116.6 130.0 137.4 138.4 137.5 131.4 178.6 240.9 273.0Repaynt 230.4 280.7 337.1 369.4 459.2 542.9 628.2 623.9 647.6 612.0Closing Balance 3490.8 379S.6 4261.1 4654.1 4747.6 4781.6 5100.7 5639.7 6440.1 7029.4

CPITALIZED iNElESTOpening Balance 193.3 227.2 230.1 2O2.0 248.4 212.9 201.4 212.0 263.4 372.6Additions 98.9 116.6 130.0 137.4 138.4 137.5 131.4 178.6 240.9 273.0Capitalizations 55.0 113.6 139.1 111.0 173.9 149.1 120.8 127.2 131.7 111.8Closing Balance 227.2 230.1 222.0 248.4 212.9 201.4 212.0 263.4 372.6 533.8x2za22zha ClSSS5D2D2a utmus=

- 74 -

National Electritity wrd - kAnual Financial Statsnts - 192-t95 20-Oct-86

IBND LoUan Paraeters Pagn 12MS million) of 20

Financial Y u Endd g. 31 USS a 196 1987 1998 1989 19S0 1991 1992 1993 1994 MI5AgWr. Aggr. ----------------- -------sug:zagau:gsxuanss =2u2s2 9fl23U

Proposed Projfet 160.0 400.0 15 1 119.0 166.4 79W9 21.2Project Cost - Foreign Cop. 105.8 264.4 6.8 72.0 119.0 52.7 14.1Foreign Cooponent - Bau Cot 92.0 230.0 6.1 63.3 103.5 45.3 11.9

IBRO Financed Expenditares 100.0 250.0 6.6 70. 6 116.6 51.6 4.6

PRIIPOSED LOAll - Rateipening Palnco z 0.0 6.6 77.2 193.8 235.0 218.8 197.9 177.1 156.2toitalized Intteres4t 20.5 51.3 6.21 0.3 3.5 11.2 17.6 19.7est Expense 17.1 15.4 13.7 12.0i.rtizatoon 1O.4 20.6 20.6 20.8 20.8 20.6

Closing alance &.6 77.2 193.8 235.0 215.8 197.9 177.1 156.2 135.4MOULD RAW LOAN - POiR 11Opening Balance 0.6 20.8 79.0 109.0 129.7 116.1 102.5 98.9 75.3 61.7Additions 20.0 64.0 44.6 34.3Interest Expense 10.1 9.0 7.9 6.9 5.6 4.5Interest Capitalized 0.9 4.1 7.7 9.8iortization 6.8 13.6 13.6 13.6 13.6 13.6 13.6 13.6 13.6

Closing Balance 20.8 79.0 109.0 129.7 116.1 102.5 68.9 75.3 61.7 48.1WORL BA LOAN - PIUR IOpening Balnce 64.5 80.3 87.7 79.3 70.9 62.5 54.1 45.7 37.3 28.9Additions 20.0 15.9Interest Expense 9.7 8.7 7.7 6.9 5.9 4.8 3.9 2.9Interest Capitalized 9.4 9.7Aaotization 4.2 8.4 8.4 8.4 8.4 8.4 8.4 9.4 8.4 8.4Closing Balance 80.3 87.7 9.3 70.9 62.5 54.1 45.7 37.3 28.9 20.5

-JSSSessssss #S ssss:s;:sssass SS=55z5::55 : : **XXXttsSsrXXX#s=:

WOLD UA LO - PWBI 11opening Balance 85.6 90.3 79.3 70.5 61.7 52.9 44.1 35.3 26.5 17.7Additions 3.5 7.8Interest Expens 6.8 6.6 6.2 5.5 4.7 4.0 3.3 2.5 1.8 1.1Interest Capitalizedtanrtlzation 8.8 8.8 8 8.8 8.3 a.8 8.a 8.8 8.8 8.8Closing Balance 90.3 79.3 70.5 61.7 52.9 44.1 35.3 26.5 17.7 8.9TOTAL IIBD LIS - BODING PRJS.pning Balanc 150. 191.4 245.0 258.8 262.3 231.5 200.7 169.9 139.1 108.3Additions 43.5 87.6 44.6 34.3 0.0 0.0 0.0 0.0 0.0 0.0

Interest Expefnw 6.8 6.6 15.9 14.2 22.6 19.8 16.9 14.1 11.3 9.5Interest Capitalized 9.3 13.8 7.7 9.8 0.0 0.0 0.0 0.0 0.0 0.0Asrtizatimn 13.0 24.0 30.9 30.9 30.8 30.8 30.8 30.8 30.8 30.8Closing Balance 181.4 245.0 258.8 262.3 231.5 200.7 169.9 139.1 108.3 77.5

PRVIOUS WORLD 8nu m LOSpning Balae 236.8 196.1 163.7 129.3 106.5 85.1 65.4 44.1 23.7 8.6AdditionsInterent Expense 16.9 14.4 12.1 S.9 8.2 6.5 5.0 3.2 1.6 0.7Interest CapitalizedAartization 40.7 32.4 34.4 22.8 21.4 19.7 21.3 20.4 15.1 7.8Closing balance 196.1 163.7 129.3 106.5 85.1 65.4 44.1 23.7 9.6 0.9I-XLOU - PCIIER I X IIOpening Balance 0.0 125.0 125.0 125.0 125.0 125.0 112.5 100.0Additions 125.0Interest Ehpenu 5.3 10.6 10.6 10.6 10.6 10.1 9.0 8.0Interest CapitalizedAotization 12.5 12.5 12.5Closing Balance 125.0 125.0 t25.0 125.0 125.0 112.5 100.0 87.5

TOTAL INTERST EIP£II19 23.7 21.0 33.3 34.7 41.4 3.9 45.7 42.9 35.6 29.2TOTAL CAPITALIZED INTEREST 9.3 141I 11.1 21.0 17.6 18.7 0.0 0.0 0.0 0.0TOTAL AMORTIZATION 53.7 56.4 65.2 53.6 62.6 71.3 72.9 84.5 79.2 71.9*ll2z#C=S:mm,:uS 3g#Sss tS :S: S :t;S:SS '#SS=t=S:Iu5"SXS#ISw

- 75 -

atileal Electricity Ibord -nnual Financial Statents - 2-195 20-0ct-8

Coeitted jad furthw Loans Pap 13(19 lilhoi1 of

FinancIl YWa Ended Ag. 31 1914 19I 1998 1999 t0 1991 1992 1993 1994 199Averae ------ '------Proetiotns---------- - -

""Rate u"$g*s ug|esy sW*n

Cemitted Loan.

Opening Balace 264. 2942.5 M 319.0 3a.3 2923.1 2570.4 2149.5 1704.4 10.1 1042.2Additions 15.0 470.6 252,2 Yl6. 17.0lnterntt

coniag blow 211.6 192.5 169.4 146.3 123.2 100.1 77.0 62.0 $1.0 44.11916 Ornwwm 19.3 38.5 38.5 353. 30.3 24.8 19,3 13.6 9.3 2.81917 Oruidmm 20.0 40.0 40.0 37.2 31.4 23.7 20.0 14.3 0.6199 Draudem 10.7 '1.4 21.4 19.9 iS.8 13.9 10.7 7.71999 radon 2.5 S.C 5.0 4.6 3.9 3.2 2.51990 Draudm 0.Y 1.4 i.4 1.3 l.a 0.:9

Aggrelate Interest Expen 148.1 163.7 19.4 182.1 1i.6 16.2 143.4 t 14.9 a 96 66.5A-qregate Capitalized Interest 92.7 7.4 89,2 i3.9 4.1 .6 1.4Amirtizatie4t

Opening iaance 176.7 '.4.3 271.9 271.9 271.9 271.9 ZL9 176.7 129.1 81.51996 Drawd 32.4 64.7 44.7 64.7 64.1 64.7 64.71997 Dradim 33.6 6713 67.3 67.3 47.3 b.3198 Draudoen 1S.0 36.0 36.0 3U.0 36.01999 Draudon 4.2 9.4 L.a 9.41990 Iraudu 1. 2.4 2.4

Aggrgate bpaymnt 176.7 224.3 21t,. 304.3 370.3 42i.9 444.1 354.3 307.9 260.3Clusing Balace 2942.5 3199.0 3169.4 223.6 1570.4 2148.5 1704.4 135.1 1042 2 792.0

Further nrruinfs

opening balance 0.0 160.9 194.2 SW5S 1042.9 15MM. 2023.3 2959.3 M37.2 5024.7Additio nL, 33.5 307.3 552. 1 4033. . 97.2 1163.0 1448.0 1201.4Interests

1996 Oradw aR 13.7 13.7 12.7 10.7 1.9 as . 4.9 2.9 1.019M7 Crauidw 1.4 2.8 2.0 2.6 2.2 t.8 1.4 1.0 0.61988 Iradon !3.1 26.1 26.1 24.3 20.5 16.9 13.1 S.31999 Dtran 23.5 41.0 47.0 43.6 36.9 30.2 25.51990 oradwn 20.5 41.1 41.1 3S.1 2.3 29.21I9 Drauo 24.3 49.6 4.6 42 40,U192 Drado 40.3 90.5 80.5 76.51993 Dradt 49.4 99.9 ".9194 PrDr 6i.5 123.11915 Oraudu 51.1

Aggregate Interest Expense 0.0 0.0 0.0 12.7 13.4 35.3 12.8 .1 124. 191.4Aqqgrea Capitalied Interet 6.8 15.1 29,6 52.5 93.6 112.4 130.0 178.6 240.9 273.0Aortization:

199 Drawdom 11.1 23.0 23.0 23.0 23.0 23.0 4.01987 Draudo. 2.4 4.9 4.9 4.8 4., 4.61999 Draudou 21.9 43.9 43.9 43.9 43.91999 Drauo 39.5 79.0 79.0 55.31990 irsdom 34.5 69.0 48.31991 Dra_o. 40.9 57.21992 Drnim 47.4

Aggregate Repayent 0.0 0 0.0 11.5 25.4 49.7 111.1 195.1 .60.5 279.8Closing Balance 160.8 194.2 501.5 1042. 1500.6 2023.3 2859.1 3937.2 5024.7 594.2ina38inu $8#2a8u s8,a a:r : t : : s a 2st as a:t a

- 76 -

NetiRns EletriCitY DOa - st Finaial Statunto - 1932-1" ' 20-ct-86

lalen and Iswration PAe 14Dkll NIii*o) of 20

Finncial Yr Endl lug. 31 199 IS 197 1968 1999 1M I9I 192 IM93 1994 1995

CAEGR Of CIUE___. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~------ _-= _IJt*$

Industrial 4454 4672 4St 5U 5058 635 6962 7586 237 8 9727Colsici 3491 3717 305 40 434 45m 4641 5115 5410 56SS 6020Doesc 21tS 24U 265 236 310 3433 3708 391 4291 459 4928Rining - 616 45 461 467 3 527 542 564 569 59 600Public Ligting 97 102 109 t7 126 136 139 143 149 150 IS0

IEi9 189 10611 11367 12121 1273 13m2 15059 161N 1739 1965 19995 21425

K IR 0 0 0 0 0 0 0 0 0 0

NlET SEIERTI 11367 12128 12973 1362 15059 1610 17399 195i6 1995 21425

Line Loss 1364 1455 1557 1678 1807 1943 209 229 2399 2571Auiliy_ Cnsutio 611 652 697 762 910 97O S35 1003 1075 1152

TUTU. LOSS IM75 2107 2254 2450 2617 2913 3023 3242 3474 3723

iR096 9DBATION 13342 14235 15227 16412 17676 19003 20422 219 23469 2514

EATiS Wm SOIE 16Mb)

m1l 7671 8314 6429 4263 2329 41 126 231 ISO 123line 230 218 200 192 164 147 130 112 71 0adius 9it I 0 0 0 0 0 0 0 ° 0 0Su Turbine - Eat Coast 2599 2872 5512 5456 5502 5114 5497 5910 5897 5741

GS Turbine - Vest Cout 3336 5830 9267 7784 1062 11445i 3523 3425 4722 3405 469 3394 4693

.R* 2642 2032 308 2986 2917 3149 2n 320 330 31U6Rigi vahtage IC - N

Grove Generation 1331: 14235 15227 16412 17676 19003 20422 21S99 23469 25149

CFACITY By 99111 (ml

Oil 1795 1795 1795 17 405 405 405 355 355 355Diesel 72 72 7. 72 12 72 72 72 54 0Rdiu Oil 180 IBO 1t0 180 0 0 0 0 0 0On Turbin - East Coast 900 900 9o0 9o0 9o 900 900 900 900Su Turbine - Nst Cust 0 0 0 0 1648 168 1648 1946 22 2549Coal 0 0 0 600 600 600 600 600 600 600H*o ir1236 1236 1236 1236 1296 1296 1296 1296 1296 12H bVoltqe IC - 8ta° °°ke° ° ° Hiih Vottap K - kko ~~~~0 0 0 0 0 0 .0 0 0 0

Available Capcity 4173 47 4173 4741 4921 492.1 4921 5171 5453 5699__~~~~~~~~m m s m m s~z.s,u a ~ ss __s2a zzz

- 7 7 Ratioe.l UKtricitv ewd - _Aa FiKial ttaatsm - 9f 20Oct4

(14NilIaln 4 1

F sial VW dEd 4. St 19W 198 19 199 99,0 11 11 2t 1913 194 1--------- e---e-----

ltal Oet Escalatle Factr 1.000 1.015 1.035 5.044 1.034 3.0 1.110 1.17 1.9 1.23

n TIU By aUCE (Bb)

Oil 72372 0314 642 4243 2329 41 124 231 150 123iesl 23e 219 200 12n 144 147 12 In It 0

Hadivm OilI 0 0 0 0 0 0 1aS Trbine - East Cant 20 2972 312 54 502 5114 W9 I1'l 97 S574Su Turbin - lant Coat 0 0 0 2l33 o2n 77i low It

coal 449We 26 282 S N ; B 3 324 X g D 2ol i,yor 314 - § § e e Risk 1oap IC______6 4 4 0

gross i*wstim I332 l4235 15227 1u? 2 17674 190 202 219 2343 2314

as PRICE il FIk (SIoIklkS F;t.1ice

oil US Jtoe 5.3 5.3 S.4 54 5.7 5.7 5.7 5.7 5.7Diee US1A124Itoeo 49 4.9 6.9 .9 6.9 4.9 4.9 (. 4 .9radius Oil U9l2OItos 6.9 6.9 t.9 4.9 *.9 4.9 6.1 6.9 4.9Gat Turbine -ast "Cost P5/PJA1I1 4.2 4.2 4.3 4.3 4.4 4.4 4.4 4.5 4.5Gas Turbise - lest coast RS4192U 5.7 5.7 S.C. 3.1 5.8 5.3Coal aSmtopt 4.3 4.3 4.3 4.3 4.3 4.3 4.3

Kih IC - hi, 5.i

LSf COSt OF FUEL

0i1 437.3 341.5 223.8 126.2 2.4 7.2 13.1 8.5 '.0Diel 15.0 13.0 12.5 11.3 10.5 0.9 7.7 4.9 0.Oadiu oil 0.0 0. 0.0 o.0 0.0 0.0 o.0 0.0 0.0Oas Turbin - Efat Cust 120.3 233.3 233.2 237.5 223.0 242.2 258.4 264.9 240.5an Turbioe - last Cot 0.0 0.0 0.0 190.3 M.3 475. 44U.1 411.9 658.9coal 0.0 0.0 150.1 145.9 201.1 145.1 l99.i 144.4 1SS.9Ilydre 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Nigh Voltase IC - flak, 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

USf CeT eF FUEL 572.6 59.5 624.4 711.2 148.5 879.2 927.2 1034.3 1126.3

FUEL CST 581.2 60S.2 653.0 751.0 S30.3 962.5 1072.5 1238.8 1395.5,mm3s3ugus #SZZ*#3S*,#3

aKPU SES 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Purchass 199 Prices 14.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.014Sf CUST CF P lCH 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

COST OF OKK PMCWAB ~~~~~0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

S.et. 1, 198CM. t IAII. - U\SE COS1 Price SSn/iklh)

Oil 0.69 54.3 57.4 44.4 29.4 1U.1 0.3 0.S 1.6 1.0 0.9Diesel 5.00 11.5 10.9 10.0 9.1 6.2 7.4 4.5 5.6 3.4 0.0ladti Ojl 0.69 0.0 0.0 0.o 0.0 0.0 0.e 0.0 0.0 0.0 0.0Oa turbine - fast Coast 0.54 14.0 15.5 29.8 29.5 29.7 27.6 Z9.7 31.4 31.8 31.0Gas tubl. - liat Cast 0.54 0.0 0.0 0.0 0.0 18.0 31.1 44.4 42.0 57.4 41.1Coal 0.69 0.0 0.0 0.0 24.3 23.4 32.6 23.5 32.4 23.4 32.4qydra 0.94 24.8 26.6 29.0 29.1 21.4 29.6 28.2 30.7 31.1 29.4Hitg Voltge K - pan 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

ONSE COST OF eFs. 6 rAUT. 104.7 110.4 113.1 120.4 123.1 120.9 133.4 143.7 14.3 155..

WERATIOS & tIIITEIIIlCE 104.7 112.0 117.1 125.6 130.0 139.2 149.0 166.2 177.5 192.6

National flectricity hrd - Rnel Fiancial Stateouts - 1982-IM95 20-0tt-86

Sq Pt. 1, 1SX6M EPWSS - BiSE COST Prict .Sn/kih)

Traueissis 0. 19 21.6 23.0 24.6 24.4 29.6 30.0 33.1 35.4 38.0 40.7istribotion 0.98 100.0 104.7 U4.2 123.0 12.5 142.5 13.1 144.2 174.0 198.5

Cuour evicn 0.14 15.9 17.0 19.2 19.6 21.1 22.7 24.4 26.1 23.0 30.0hatw bad4 0.31 35.2 37.4 40.2 43.3 46.7 50.2 53.9 57.6 U.0 46.4Traifial and blfare 0.26 29.4 31.5 33.7 36.4 39.2 42.1 45.2 46.1 52.0 15.7*duieistraties 0.26 29.6 11.1 33.7 36.4 £9.2 42. 45.2 41.5 52.0 55.7Geneira 0.32 34.4 3.9 45.5 44.7 43.2 51. 555.7 59.7 64.4 40.6

TOTM. Ot Er. - Usf COST 2.4 248.3 206.2 306.2 330.0 355.4 392.1 410.6 440.3 472.9 505.6

TOTAL OT MM HU26. 290.5 316.9 345.0 375.3 412.6 458 9 509.3 54.9 26.5

0M CS 11t1B EIPEES m.9 402.4 434.0 470.3 505.2 551.3 407.9 415.5 742.5 819.

- 78 -

National Electricity krd - Annua Financial Statnents - 1M2-lYIS 204ct-86

Taxes and Dividends Pae 16U1 WUllinI of 20

Financial Ye Ended Avg. 31 1986 IW1 1 199 190 1 19192 1993 1W I95---PrOJOCiMs

INllE BEFOII TAB I DIVIKIS 597.2 937.5 9. 1023.9 1016.7 1075.2 1019.7 105L6 1030.4 1040.0

eprciation 345.1 412.2 493.2 523.3 603.0 650.2 72.o m.0 864.4 951.1Adi. fr Sale of Assets 11.5) (1.4) (1.3O 11.2) 11.1) (1.0) (0.9) (0.6) (0.73 (0.6)Total Iililu£a"tpsnu 343.6 410.8 91.9 522.1 601.9 649.2 72.1 790.2 863.7 950.5

IICIIIE iEflE o EIIUCTI 940.8 1348.3 1446.0 1546.0 1619.5 1724.4 1741.1 1848.7 1894.1 1990.6

(lln) kedctions

Initial Allmaeu 228.4 452.7 230 3 509.1 403.3 277.2 223.0 205.1 254.4 312.4Annul Capital Allnuae 276.4 389.3 446.7 523.7 624.2 693.3 748,9 79.8 8631 940.9Other ODeutions 0.5 0.6 0.6 0.7 0.7 0.8 0.8 0.9 0.9 1.0

Tottl keductions 505.3 142.5 678.1 933.4 1029.3 971.2 972.5 1005.7 1118.3 1254.24AM!E IllE 435.5 505.8 767.9 712.6 590.3 753.2 769.2 843.1 7M5.7 736.3

sam*aaumaaumsuuuamarn ~ ~ ~ ~ ~ ~ ~ ~ wxaaxaax

Pcenta of Inate Tn 45T 452 45 452 452 452 45T 452 452 452illCOIE TA 196.0 227.6 345.6 320.7 265.6 338.9 34.2 37.4 349.1 331.4

NET IICOII£ AFTER TAX 597.2 709.9 608.6 703.2 751.1 736.2 673.5- 679.2 691.3 709.7

OMt. of Nalaysda Invotount 849.4 648.4 84.4 848.4 949.4 94.4 849.4 948 048.4 948.4Percentage of Dividend 53 53 5! 5 52 52 52 52 52 53DIVIDEON 42.4 42.4 44 42.4 42.4 42.4 42.4 42.4 42.4 42.4

IMCOIE B£FORE AWUSTUENS 554.7 667.5 4'., 660.8 70.6 693.9 631.1 636.9 639.9 666.3M *man ---- ass*~18222222222. 3322222222222282222au22

AdJustents (1.5) (1.4) (1.3) (1.2) (1.1) (1.0) (0.9) (0.9) (0.7) (0.6)

lET INCONE 553.2 666.1 564.9 659.6 707.5 692.0 630.2 636.0 638.2 665.7w__~m z m arnaaz8u~ sa m usmr 22

- 79 -

Mational Electricity Bowd - bn;.4 Fiancil Statents - 1912-IM 20ct-86

Raceivables and Payabln Pape 17(INS filligol Of 20

Finascial Year Eaded Aug. 31 ISS 1994 I97 1998 1989 19O 1SI I92 13 1994 1991(Act.) -Prrjections--__

COTS CE I9I

Sale to Publi Sectr 263.6 253.8 257.S 275.4 296.8 319.7 343.7 369.4 394.1 424.5 462.2Payet cycle (ka) 91 SO 90 90 9 9 90 90

Public Sctwr brivables 65.9 62.6 63.5 67.9 73.2 78.8 84.8 91.1 97.7 104.7 114.0

SaIlS to Privat SectWr 2135.8 2053.7 2083.2 22Z2.4 20I.? 2506.7 2781.0 2918.6 3204.5 344.5 373.9Pavyet Cycle (Days) 46 45 4 43 42 41 40 39 38 37 36

Privte Sctr Reivables 271.5 255.4 253.4 265.0 279.0 293.4 307.9 322.6 33.1 351.9 372.9

TOTAL ACCOINITS RECEIVABLE 337.4 318.0 316.9 332.9 352.2 372.2 m.5 413.7 434.9 456.6 486.9

ACOUS PAYAE

O ITIUCTtIN EIPENDITIE 1215.9 139.4 1601.4 1536.9 1357.3 1110.5 1272.0 1572.3 189.2 2041.7 1745.1INITIEY 357.9 438.3 520.4 550.9 629.2 697.7 774.0 851.0 924.7 1016.1 1121.9lcer of says 50 50 50 50 50 50 50 50 S0 50 50CAPITAL PAYAIL 215.6 246.3 290.7 286.0 M.l 246.3 280.3 332.0 385.9 418.9 3.7

COSTS O OUTIISFuel 1161.3 9O9.0 501.2 609.2 653.0 751.0 930.3 992.5 1072.5 1238.8 1395.5kulk Purchass 13.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other Cbh lpwatieg Expesns 347.5 372.9 402.6 434.0 470.8 50.2 551.8 607.9 675.5 742.5 619.3TOTAL COSTS F O T 1542.5 1357.9 983.8 1043.3 1123.9 1256.2 1302.0 159.5 114.0 I198.3 2214.9

user o a 24 24 24 24 24 24 24 24 24 24 24

PRTII PYABL 101.4 9.3 64.7 68.6 73.9 92.6 90.9 104.6 114.9 130.3 145.6

MOTAL PIDIECE) PMABES 317.0 335.6 355.4 354.6 34.0 32.9 371.1 434.5 500.8 549.2 53.4-~~~~~~~~~~~~~~~~~~~~~S

Page 18 of 20

- 80 -

Assumptions for Financial Projections

Income Statement

(1) Total Generation - is derived in the table entitled"Sales and Generation" (page 14).

(2) Losses -- is derived in the table entitled "Sales andGeneration" (page 14).

(3) Power Sold - is derived in the table entitled "Salesand Generation" (page 14).

(4) Income from Electricity Sales -- is derived in the tableentitled "Derivation of Average Tariff" (page 6).

(5) Net Revenue Exclusive of Sales - is projected toincrease by 5% per year.

(6) Fuel Expense -- is derived in the table entitled "DirectCash Flow" (page 15).

(7) Bulk Purchases Expense -- is derived in the tableentitled "Direct Cash Flow" (page 15).

(8) Other Cash Operating Expense - is derived in the tableentitled "Direct Cash Flow (page 15).

(9) Depreciation -- is derived in the table entitled "FixedAsset Formation (page 9).

(10) Sundry Receipts - is assumed to increase from 1985levels by 5% each year.

(11) Total Interest Payments -- is the swu of interestcapitalized and interest charged to operations.

(12) Interest Capitalized - is derived in the scheduleentitled "Borrowings Summary" (page 11).

(13) Interest Charged to Operations - is derived in theschedule entitled "Borrowings Summary" (page 11).

(14) Transfers from Contributions Accounts -- are derivedin the schedule entitled "Fixed Asset Formation" (page 9).These transfers represent the rate at wbich fixed assets,which were financed by contributions, are absorbed intoNEB's plnt and equipment, and correspondingly, the rateat which these contributions are being absorbed into NEB'snet worth.

(15) Income Tax - is derived in the schedule entitled "Taxesand Dividends" (page 16).

Page 19 of 20

- 81 -

(16) Dividend -- is derived in the schedule entitled "Taxesand Dividends" (page 16).

Flow of Funds

(17) Gross Consumer Contributions - is derived in theschedule entitled "Fixed Asset Formation" (page 9).

(18) Net Working Capital Increases -- excludes Cash andLiquidity Requirements.

(19) Principal Repayments - is derived in the schedule entitled"Borrowings Summary" (page 11).

(20) Twelfth Power Porject - is derived in the scheduleentitled "Capitalization Values" (page 8).

(21) Other Projects -- is derived in the schedule entitled"Capitalization Values" (page 8).

(22) Capitalized Interest -- is derived in the schedule entitled"Borrowings Summary" (page 11).

(23) Govt. Contributions--RE Projects -- is derived in the scheduleentitled t'Fixed Asset Formation" (page 9).

(24) Consumer Deposits - are assumed to increase directly inproportion to tariff revenues.

(25) All IBRD and B Loan Drawdowns -- are derived in the tableentitled "IBRD Loan Parameters" (page 12).

(26) Committed and Existing Loans - are derived in the tableentitled "Committed and Further Loans" (page 13).

(27) Further Borrowings -- is derived in the table entitled"Committed and Further Loans" (page 13).

(28) Cash -- is assumed at 17 days operating requirements.

Balance Sheet

(29) Gross Fixed Assets in Operation -- is derived in thetable entitled "Fixed Assets Formation" (page 9).

(30) Accumulated Depreciation -- is derived in the tableentitled "Fixed Assets Formation" (page 9).

(31) Net Fixed Assets on Operation -- is derived in the tableentitled "Fixed Assets Formation" (page 9).

- 82- Page 20 of 20

(32) Work in Progress - is derived in the table entitled"Fixed Assets Formation" (page 9).

(33) Inventory - is projected to decrease gradually fromabout 5X to 42 of Gross Fixed Assets.

(34) Fuel Inventories - are projected at about 24 daysrequirements.

(35) Accounts Receivable -- is derived In the table entitled"Receivables and Payables" (page 17).

(36) Other Receivables - is projected to inc:easQ in relationto inflation. This account includes contributions andother payments due from GOM, many of whic-h are received latein GOM's fiscal year (meaning early in NEB's following non-coincident financial year).

(37) Reevaluation Reserve - is derived in the table entitled"Fixed Asset Formation" (page 9).

(38) Liquidity for Investment and Liquidity Borrowings - arethose uses or sources of incremental cash necessary toenable NAB to maintain cash at 17 days operating require-ments.

(39) Accounts Payable -- are derived in the schedule entitled"Receivables and Payables" (page 17).

(40) Other Current Liabilities - is expected to increaseby about 10% per year. This includes mainly accruedinterest and retention payments.

- 83 -

ANNEX 20Page 1 of 3

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Inventory of Fixed Assets and Fixed Asset Accounting Study

Terms of r zference

Objective

The objective of the inventory of fixed assets would be:

(a) to verify independently NEB's catalogue and evaluation of its fixedassets, the primary records of which are centrally located at theAccounts Department Head Office, as on August 31, 1987.

(b) to verify independently NEB's catalogue and clearance of the Work inProgress account. The relevant primary records are located atvarious District Accounting Units. As necessary, procedures govern-ing the capitalization of completed works may need to be revised;and

(c) to review NEB's methodology for revaluation of fixed assets.

Scope of Work

The study would include:

(a) A verification of NEB's comprehensive inventory of Fixed Assets,categorized as Generation, Transmission, Distribution, movable, andother assets, an of August 31, 1987.

(b) A verification of valuations based on historical costs, or whereunavailable a reasonable estimate thereof, adjusted for depreciationup to the date of valuation.

(c) A verification of the items included in NEB's work in progressaccount; based on a physical inventory of generating plants,substations and office buildings and a review of engineering dataregarding transmission and distribution lines, make recommendations(as appropriate) for capitalizing items currently included underwork in progress.

(d) Review NEB's procedures governing the movement of items between workin progress and gross fixed assets. As appropriate, recommendadjustments to those procedures to ensure future consistency betweenNEB's accounting records, engineering records, and generallyaccepted accounting practices. Review NEB's depreciation rules andregulations and recommend adjustments as may be needed to ensureconsistency between the accounting records, operational data, andgenerally accepted accounting practices.

- 84 -

ANNEX 20Page 2 of 3

(e) Develop a system for the periodic inspection and verification ofmovable assets.

(f) Develop comprehensive schedules indicating the replacement Yoe.lue ofgross fixed assets, as of August 31, 1987, based on the results ofthe preceeding fixed asset inventory and a review of depreciationschedules. Assist NEB by developing a methodology for regularly up-dating this revaluation based on a system of indexation of histori-cal cost data.

Terms of Reference

(a) Review and amend (as appropriate) NEB's comprehensive list of fixedassets, classified into Generation, Transmission, Distribution,Movable and other Assets.

(b) Review and amend (as appropriate), the accorded value based onhistorical cost where available (or a reasonable estimate thereofwhere historical cost cannot be established), adjusted fordepreciation through August 31, 1987.

(c) Review and amend (as appropriate) NEB's list of plant and equipmentresiding irn work in progress.

(d) Review and recommend changes (as appropriate) in accounting entriesfor all of the items identified in activity (c), includingcapitalizations to gross fixed assets; and retain in work inprogress amounts properly reflecting that portion of these worksstill to be completed.

(e) Review NEB's procedures to be used upon placement into service of anasset, paying particular attention to those rules for capitalizingwork in progress to gross fixed assets, and make recommendations (asappropriate) for adjustments to those procedures.

(f) Ensure that records and accounting for work in progress and itstransfer to gross fixed assets are consistent with the requirementsof generally accepted accounting principles.

(g) Review and amend (as appropriate) formats for fixed asset registers.

(h) Review depreciation procedures and recommend (as appropriate)adjustments to reflect more appropriately NEB's experienceconcerning the useful lives of assets.

(i) Recompute NEB's accumulated depreciation based on the preceedingfixed asset inventory and the newly recommended depreciationschedules. As necessary, recommend accounting treatment to be usedfor adjusting the difference between the computation of accumulateddepreciation according to the depreciation schedule formerly in useand that computed according to the new schedule.

- 85 -

ANNEX 20Page 3 of 3

(j) Ensure that the new accoanting treatments recommended fordepreciation are consistent with generallf accepted accountingprinciples.

(k) Develop a system for the periodic inspection and verification ofmovable assets and, as necessary, prepare manuals describing therecommended procedures to be folloired by NEB staff.

(1) Based on the preceeding fixed asset inventory and a list ofcomponent costs adjusted to August 31, 1986 levels, compile a listof NEB's fixed assets valued at replacement cost as of that date andcompute accumulated depreciation schedules appropriate to the changein asset value.

(m) Review NEB's application of the fixed asset deflator and recommendan accounting treatment whereby adjustments required by changes inthe index for past years may be taken in the current year.

(n) Compare the results obtained to date by using the fixed assetdeflator with those obtained from the preceding list of revaluedassets. As appropriate recommend a formula to adjust the fixedasset deflator.

866- ANNEX 21Table I

MALAYSIA

ENERGY EFFICtENCY AND PLANT REWABILITATION PROJECT

National Electricit; bard (NEI)

Tariff SUMmar

Rates before 9/1/85 Rates after 9/1185 RatesCategory io sen per unit Category In sen per unit after 3/13/86

Tariff A, Tariff A%-mot c For the first 100 unite 20 sen DoetcFor the first 100 unite 20 men No change

tariff per month tariff per monthfor the next 900 units 23 sen For the next 900 units 23 senper month per mionth

For each additional 26 sen For each additional 26 senuntt per month unit per month

Tariff S Tariff BlZ:ow-votage For the first 200,000 25 sen Low--voltage For all units 24 sen No change exceptcommercial unitj per conth commercial 102 discount giventariff For each additional 27 sen tariff to hotels

unit per mionth

Tariff C Tariff ClNigh-voltage For each kilowatt of M$12 MTed7-'oltage For each kilowatt of M$12 No change exceptcommercial maximtum demand per general com- maximum demand per 102 discount giventariff month mercial tariff month to hotels

For the first 800,000 19 sen For all units .8 senunits per month

For each additional 21 senunit per month

Tariff C2Mediuam-voltage For each kilowatt of 4($l9 No chanLge exceptpeak/off-peak maximum demand per 102 discount givencommercial month during the to hotelstariff peak period

For all units during 18 senthe peak period

For all unnts $.iring 8 senthe of f-peak period

Tariff D Tariff DLo-oltage For the first 200,000 23 sen -Tw-WVoltage For all units 21 sen No change exceptindustrial units per month induatrial 102 discount giventariff For each additional 25 sen tariff to all industries

unit per month and 202 discountgiven to approvedtextile industries

-87 - ANN b21

Tabre I

MALAYSIA

FNERGy EFFICIENCY Am PLANT RENAILITATION PROJECT

Nktional tlectriitty oard (NEI)

Tariff Summary

Rates before 9/1/85 Rates after 9/1/85 RatesCategory in sen per unit Category in sen per unit after 3/13/86

Tariff E Tariff E1High-voltage For each kilowatt of Y$12 medium-voltage For each kilowatt of M$12 No change exceptindustrial maxi2um demand per general indus- maximum demand per 102 discount giventariff month trial tariff month to all industries

For the first 2,000,000 17 sen For all units 16 sen and 20% discountunits per month given to approved

For each additional 16 sen textile industriesunit per month

Tariff E2Medivoltage For each kilowatt of M$17 No change exceptpeak/off-peak maximum demand per 102 discount givenindustrial month during the to all industriestariff peak period and 202 discount

For all units during 16 sen given to approvedthe peak period textile industries

For all units during a senthe off-peak period

Tariff e3Righ-voltage For each kilowatt of M$15 No change exceptpeak/off-peak maximum demand per IO discount givenindustrial month during the to all industriestariff peak period and 202 discount

For all units during 1S sen given to approvedthe peak period textile industries

For all units during 7 senthe off-peak period

Tariff F (B) Tariff FLOw-voltage For the first 100,000 19 sen Low-voltage For all units 19 sen No change exceptmining tariff units per month mining tariff 102 discount given

For each additional 21 senunit per month

Tariff F (A) Tariff FlHigh-voltage For each lilowatt of M$12 Nedium-voltage For each kilowatt of ?M$12 No change exceptmining tariff maxinmi demand per general mining maximum demand per 102 discount given

month tariff monthFot the first 2,000,000 17 sen For all units 16 senunits per month

For each additional 16 senunit per month

Tariff F2Medium-voltage For each kilowatt of M$17 No change exceptpeak/off-peak maximum demand per 102 discount givenmining tariff month during the

peak periodFor all units during 16 senthe peak period

For all units during 8 senthe off-peak period

Tariff C Tariff GPublic and For all units 83 sen Public and For all units 30 sen No changestreet light- street light-ing tariff ing tariff

- 88 - ANNEX 22

MALAYSIA

ENgRGY EFFICIENCY AND PLANT REHABILITATION PROJECT

NEB's Investment Program: Calculation of the Internal Economic Rate of Return(x$ million)

Investment costs Operations and maintenance costsGene- Trans- Distri- Gene- Trans- Distri- Total Sales Net

Year ration mission bution Total ration mission bution Fuel Total costs revenues benefits

1983 54.1 - 54.1 - - - - 54.1 - -54.11984 Sl.9 - - 51.9 - - - - - 51.9 - -51.91985 87.3 - - 87.3 - - - - 87.3 - -87.31986 173.2 48.6 42.4 264.2 - - - - - 264.2 - -264.21987 383.5 202.0 106.3 691.8 - - - - 691.8 - -691.81988 272.8 348.1 286.3 907.2 - - - - - 907.2 - -907.21989 270.4 385.2 392.8 1,047.6 26.4 .3.l 36.3 R5.6 158.6 1,206.2 450.4 -755.81990 246.6 283.3 355.8 885.5 48.4 19.2 67.2 160.4 295.7 1,181.2 835.4 -345.81991 292.7 240.0 568.4 1,101.1 48.9 19.2 67.2 162.0 297.3 1,398.4 835.4 -563.01992 280.0 286.4 584.1 1,150.0 48.9 19.2 67.2 163.7 298.9 1,449.4 835.4 -614.11993 162.0 164.5 324.0 650.0 77.0 30.2 105.9 260.3 473.4 1,123.9 1,315.7 191.81994 39.6 101.4 244.2 385.2 94.9 37.2 130.5 323.9 586.4 971.6 1,620.9 649.31995 - - - - 98.6 38.6 135.6 340.1 613.0 613.0 1,685.1 1,072.11996 - - - - 98.6 38.6 135.6 343.5 616.4 616.4 1,685.1 1,068.71997 - - - - 98.6 38.6 135.6 347.0 619.99 619.9 1,685.1 1,065.21998 - - - - 97.3 38.1 133.8 345.7 614.8 614.8 1,662.1 1,047.31999 - - - - 93.3 36.5 128.3 334.7 592.7 592.7 1,593.5 1,000.72000 - - - - 90.4 35.4 124.3 327.7 577.8 577.8 1,544.7 966.82001 - - - - 90.2 35.3 124.1 330.3 580.0 580.0 1,541.6 961.62002 - - - - 90.1 35.3 123.8 332.9 582.1 582.1 1,538.5 956.42003 - - - - 87.2 34.2 119.9 325.6 566.9 566.9 1,489.7 922.92004 - - - - 81.7 32.0 112.3 307.9 533.9 533,9 1,395.0 861.12005 - - - - 78.8 30.9 108.3 300.2 518.2 518.2 1,346.2 828.12006 - - - - 78.6 30.8 108.1 302.5 520.0 520.0 1,343.2 823.22007 - - - - 78.4 30.7 107.9 304.8 521.8 521.8 1,340.1 818.3200e - - - - 75.6 29.6 103.9 296.6 505.8 505.8 1,291.3 785.52009 - - - - 66.5 26.0 91.4 263.5 477.4 477.4 1,135.7 688.32010 - - - - 63.8 25.0 87.7 255.4 431.9 431.9 1,089.8 657.92011 - - - - 63.8 25.0 87.7 257.9 434.4 434.4 1,089.8 655.42012 - - - - 61.1 23.9 84.0 249.6 418.7 418.7 1,044.1 625.42013 - - - - 47.7 18.7 65.6 196.8 328.8 328.8 815.1 486.32014 - - - - 37.0 14.5 50.9 154.1 256.4 256.4 631.8 375.42015 - - - - 37.0 14.5 50.9 155.6 257.9 257.9 631.8 373.92016 - - - - 26.3 10.3 36.1 111.6 184.3 184.3 448.7 264.42017 - - - - 15.5 6.1 21.4 66.7 109.7 109.7 265.5 155.82018 - - - - 15.5 6.1 21.4 67.4 110.4 110.4 265.5 155.12019 - - - - 15.5 6.1 21.4 68.0 111.0 111.0 265.5 154.42020

- 89 - ANNEX 23Page 1 of 3

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Project Components - Calculation of the lteirnalEconomic Rate of Return IERR

A. Thermal Power Plant Rehabilitation, Improved Maintenanceand Conversion to Oil/Gas Firing

Rehabilitation of Plant and Improved Maintenance

Summary of Benefits

Type of improvement Power Station Estimated benefit

Improved air heater sealing, Increased capacityHP-4 heater replacement, Tuanku Jaafar + 30 MWimproved condenser vacuum Prai + 20 MW

Improved condenser vacuum, more Increased efficiencyeffective preventive maintenance Sultan Iskandar + 0.5%

Improved air heater seals, reuse ofclean drains, improved burners/firing Tuanku Jaafar + 1.5%system, improved condenser vacuum, Prai + 1.02move effective preventive maintenance

Reduced down time due to on line Increased Plant Availibilitycondenser cleaning, continuous Tuanku Jaafar + 5%chlorination, reduced scheduled Prai + 5%maintenance period Sultan Iskandar + 5%

Estimate of Savins

Capacity Related Savings

A 5% increase in plant availability represents about 5% (66 MW)reduction in reserve capacity requirement. Together with a 50 MW increase inplant output, the total capacity saving is 116 MW. Valued at US$360/kW thisamounts to US$41.8 million, or US$4.9 million per annum (amortized at 10% for20 years), from 1992 to 2005 with salvage of US$27.2 million in 2005.

- 90 - ANNEX 23

Page 2 of 3

Energy Related Savings

Savings in fue1 cost due to increased thermal efficiency are com-puted for the three stations, for their projected average annual plant factors(Tuanku Jaafar 25%, Prai 10%, Sultan Iskandar 50%). It is assumed that Praipovwc station will burn oil (price of oil assumed to be US$120/ton in 1990)while Tuanku Jaafar and Sultan Iskandar power stations will burn gas from 1990onwards (economic cost of gas assumed to be US$1.54/MHBTU).

Evaluation of IERR

With an investment of about US$20 million in plant rehabilitationand maintenance management system, the cost and benefit streams are as under:

Invest- Generation Fuel cost savings Capacityments Tuanku Sultan Tuanku Sultan cost Net(US$ Jaafar Prai Iskandar Jaafar Prai Iskandar savings benefit

Year million) - GWh ----------- --------------- US$ million ---------------

1987 2.0 - - - - - - - -2.01988 6.0 - - - - - - - -6.01989 6.0 - - - - - - - -6.01990 6.0 1,300 400 1,050 0.75 0.38 0.27 - -4.61991 - 1,300 400 1,050 0.75 0.38 0.27 - +1.41992-2004 - 1,300 400 1,050 0.75 0.38 0.27 4.9 +6.32005 - 1,300 400 1,050 0.75 0.38 0.27 -22.3 -20.9

IERR = 19.8%

Sensitivity: For 25% reduction in either generation or in fuel cost, IERR = 18.4%For 20% increase in capital cost, IERR = 16.2%

Conversion from Oil to Oil/Gas Firing

Against an estimated expenditure of about US$10.5 million for theconversion of 600 MW of thermal plant at Tuanku Jaafar from oil to oil/gasfiring, the net annual fuel saving by burning natural gas (economic costUS$1.54/MMBTU or USg 1.55 per kWh at 33% efficiency) instead of fuel oil(price US$120/ton or US/ 3.0/kWh at 33% efficiency) ia estimated at US$17.3million, at an annual generation level of 1,300 GWh. The internal economicrate of return for conversion from oil to gas firing is very high, the paybackperiod being less than one year.

- 91 - ANNEX 23Page 3 of 3

B. Transmission Lines and Sul.stations for Supplyto Kuala Lumpurr( 3s mil-lIion)

Bulk /cInvest- energyments O&M supply Total Sales Revenues Net

Year /a /b cost cost GWh /d benefit

1987 9 - - 9 - - -9.01988 52 - - 52 - - -52.01989 114 2.5 6.5 123.0 130 9.9 -113.11990 36 2.5 26.7 65.2 535 40.7 -24.51991 10 2.5 30.2 42.7 605 46.0 3.31992 10 5.0 43.0 58.0 860 65.4 7.41993 10 5.0 50.5 65.0 1,010 76.8 11.81994 10 5.0 60.5 75.5 1,210 92.0 16.51995 10 5.0 74.0 89.0 1,480 112.5 23.51996 10 5.0 90.0 105.0 1,800 136.8 31.81997 10 5.0 111.2 126.2 2,225 169.1 42.91998 5 5.0 124.0 134.0 2,480 188.5 54.51999 5 5.0 131.0 141.0 2,620 199.1 58.12000 5 5.0 133.8 143.8 2,675 203.3 59.52001 5 5.0 137.2 147.2 2,745 208.6 61.42002-2015 5 5.0 140.5 150.5 2,810 213.6 63.1

IERR 13.9%

/a Investments after 1990 allow for distribution system growth.Th O&M cost assumed as approximately 2.5% of capital cost.7i Bulk energy supply cost based on long-run marginal cost of US¢ 5/kWh at

substation MV bus./d Revenues based on US¢7.6/kWh (based on average revenue of Mc 20.3/kWh less

7.5% for distribution l3sses).

Sensitivity: For 20% increase in project capital cost, IERR = 12.2%For 20% reductior in demand, IERR = 11.0%For 2 years delays in project implementation, IERR = ll.n%

- 92 -

ANNEX 24Page I of 3

MALAYSIA

ENERGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Distribution System Planning-Consultancy St4dy

Terms of Reference

8cope

1. To develop and consolidate in-house capabilities to deal -'ithdistribution system planning, implementation and operation.

2-. The study shall:

(a) develop appropriate distribution planning methodology ormethodologies to be used as common approach in distribution systemplanning;

(b) examine current methods of distribution project planning andimplementation and recommend suitable alternative methods to achieveearlier completion dates and reduced project costs;

(c) examine current design and construction standards, operational andmaintenance procedures, including standing instructions andcirculars, and recommend alternative procedures to achieve greaterefficiencies;

(d) develop methodology for and evaluate distribution system losses andgive recommendations on strategy for loss reduction; and

(e) document the methodologies subsequently in a manual or manuals on"Distribution System Planning, Implementation and Operation."

The study will be divided into three main segments, viz., planning,implementation and operation.

3. Distribution Planning Methodology.

(a) The consultant shall examine in-house reports on distributionplanning and current methodologies employed in the planning processfor microarea load forecasting, planning moJels for least-costplanning of distributicn systems, and comprehensiveness of the wholeplanning process.

(b) The consultant shall evaluate the adequacy of the work.

(c) Taking note of current state-of-the-art methodologies elsewhere inthe world, the consultant shall indentify shortfalls in the current

- 93 -

ANNEX 24Page 2 of 3

methodology and propose appropriate methodology for future use indiistribution systems development studies.

In this context, emphasis should be givea to at least thefollowing: (i) system security, (ii) reduction of distributionlosses, and (iii) computer-aided techniques.

(d) The consultant shall carry out a sample illustrative case study onan actual planning project which shall be identified and agreed toduring the course of the study. Key problem areas such as dataacquisition and availability shall be highlighted and solutionstypified.

(e) The consultant shall also review the present orgatization andplanning capability of the distribution departments. Keyinstitutional/organizational issues shall be identified ar.dhighlighted. Appropriate measures to overcome the problems shall berecommended.

(f) The consultant shall analyze the training requirement of the staffof the distribution departments and recommend suitable trainingprograms to overcome immediate deficiencies.

4. Distribution Project Planning and Implementation.

(a) The consultant, together with NEB engineers, shall examine thecurrsnt methods employed in distribution project planning andimplementation and recommend an appropriate method to improve theproject uianapement capability with the principal objectives ofachieving earlier completion dates and reducing project costs.

Focus shall be given to at least the following: (i) projectcoordination, (ii) use of standardized components, (iii) compactdesigns, and (iv) budgetary and inventory control.

(b) The consultant is expected to carry out sufficient investigativefield work to generate information and data to formulate thealternative method(s). The investigative work shall includesampling of procedures being followed in different parts of thecountry.

5. Distribution System Operation add Maintenance.

(a) The consultant, together with NEB engineers, shall examine thecurrent modus operandi in distribution system operation andmaintenance. Areas covered shall include, but not be limited to,the following: ti) load management, (ii) operational flexibility,(iii) contingency measures, (iv) preventive maintenance, (v)safety/competency aspects, (vi) efficiency of fault rectification,and (vii) data and information management.

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ANNEX 24Page 3 of 3

(b) The consultant shall assess in-house standing instructions andcirculars to verify their validity, or otherwise, in light of thefindings of the study; arpropriate amendments shall be recommended.

6. Conduct of the Study/Technology Transfer.

(a) It is intended that these studies will be used constructively by NEBas a basis for the development and extension of in-housecapabilities in distribution planning, operation and maintenance.It is envisaged that the bulk of the study will be conducted at theoffices of NEB in Malaysia, and only a minimal, if at all, may Decarried out at the home office of the consultant. Facilities willbe made available by NEB to the consultant wherever possible for theconduct of the study. To this extent, the consultant shall detailout in the proposal the facilities required. Every effort shall oemade to maximize the participation of NEB engineers in the project,through direc. involvement in the studies, briefings and progressmeetings or the holding of short informel seminars and workshopswhere deemed appropriate. The consultant shall indicate how itwould achieve maximum participation of WEB engineers.

(b) Computer Software

WEB has a fairly comprehensive catalog of software for systemsdevelopment studies, and additional software is being acquired.Howver, there is no software dedicated to distribution.

The consultant may use NEB's existing software for the study, ifappropriate. It is expected, however, that the consultant will usean entirely different set of software.

All software used shall be handed over to NEB at the end of thestudy. Furthermore, the consultant shall ensure that the softwarehas been modified for application on Prime 9750 machine with Primosoperating system. The consultant shall ensure LLN engineers whowill be taking over the software have been thoroughly trained in itsuse.

(c) Stages of Work

The consultant is expected to divide the work in a number of stagesand submit interim reports which will be discussed with NEB. Thefollowing stages and/or sequences are envisaged: (i) assessment ofcurrent methodologies in distribution pianning, project implementa-tion and system operation and maintenance; (ii) evolution of newmethodologies in the above fields; (iii) demonstration of the newmethodologies by application on actual projects; and (iv) prepara-tion of the Distribution Manual.

ANNEX 25

MALAYSIA

ENFRGY EFFICIENCY AND PLANT REHABILITATION PROJECT

Documents in Project File

1. Project Papers -- Power Station Plant Improvements/Mofidications -- NEB.

2. Project Paper -- Computerized Maintenance Management System for PowerStations -- NEB.

3. Project Papers -- Power Supply to Kuala Lumpur

4. The Improvement of Plant and Plant Management-Report, Tokyo ElectricPower Services Co Ltd -- August 1983.

5. Review of Proposal to Convert Connaught Bridge Combustion Turbines forCombined Cycle Operation -- NEB.

6. Project Papers -- Proposal to Set Up New Distribution Control Centers andto Upgrade the Facilities at the National Load Dispatch Center -- NEB.

IBRD 2015716i0 I&*20 420 ¶.0

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