RETURN TO RESTRICTED

REPORTS DESK Report No. TO-573a

WITHINONE WEEK

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

APPRAISAL OF THE DEVELOPMENT PROGRAM

OF THE

SWAZILAND ELECTRICITY BOARD

SWAZILAND

March 15, 1967

Projects Department

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CURRENCY EQUIVALENTS

U.S. $1 = Rand 0.711 Rand = U.S. $1. 40R 1,000,000 = U.S. $1,400,000

The financial year of the Swaziland ElectricityBoard ends on March 31.

WEIGHTS AND MEASURES EQUIVALENTS

1 foot (ft.) = 0. 3048 meters (m.)1 cubic foot = 0. 02832 cubic meters1 statute mile = 1. 609 kilometers1 ton = 1.016 metric ton

SWAZILAND

APPRAISAL OF THE DEVELOPMENT PROGRAM

OF THE

SWAZILAND ELECTRICITY BOARD

TABLE OF CONTENTS

Page No.

SURMMY i -

I. INTRODUCTION 1

II. THE ELECTRIC POWER INDUSTRY OF SWAZILAND 1Other Electricity Supplies 2

III. THE SWAZILAND ELECTRICITY BOARD 2Organization and Management 2Existing Facilities of SEB 2

IV. THE POWER MARKET 3Forecast of Sales 4Growth in Demand 4

V. NEW PLANT REQUIREMENTS 5

VI. THE PROJECT 5Status of Engineering and Procurement 7Construction Schedules 7Estimated Cost 7Unit Costs and Generating Costs 8

VII. ADDITIONAL EXPANSION WORKS 8

VIII. FINANCIAL ASPECTS 9Past Earnings 9Present Financial Position 10Tariffs 12Accounting and Audit 12Financing Plsn 13Future Earnings 14Future Financial Position 15Effect of Cancellation of Part B of

the Project 15Debt I-imitation 15

IX. JUSTIFICATION OF THE PROJECT 16

X. CONCLUSIONS 16

This report is based on the findings of a mission toSwaziland in July 1966 composed of Messrs. G.E. Wyatt andA.R. Whyte of the Bank.

List of Annexes

1. Actual and Estimated Sales 1964-1973

2. Additional Industrial Loads - Estimated Maximum Demand in KW

3. System Capacity and Demand

4. System KWH, Load Factor and Plant Statistics

5. Comparative Costs of Alternative Means of Generation

6. Estimated Cost of the Project

7. Income Statements

8. Balance Sheets

9. Sources and Applications of Funds

10. Financial Position Excluding Part B of the Project

Map

SWAZILAND

APPRAISAL OF THE DEVELOPMENT PROGRAM

OF THE

SWAZILAND ELECTRICITY BOARD

SUMMARY

. EThis report covers the appraisal of a project of the SwazilandElectricity Board (SEB) consisting of two parts. Part A comprises theextension of the existing Edwaleni Hydroelectric Project, the constructionof the Magaduza Hydroelectric Project and the provision of additionaldiesel plant. Part B comprises a 66 kv line extension to supply theUsutu Pulp Companyls pulp mill and reinforce supplies to the Capital townof Mbabane, A Bank loan of US$2.75 million equivalent has been requestedto cover the foreign exchange cost of the Project, the total cost ofwhich is estimated to be about US$3.4 million equivalent.

ii. The borrower would be the Government of Swaziland which would re-lend to the SEB. The loan would be guaranteed by the British Government.

iii. Part A of the Project would provide 11.5 MW of hydroelectricgenerating capacity at Edwaleni and Magaduza, and 5 MW of diesel generatingcapacity to back-up the hydro plants at periods of low river flow. Thispart of the Project also includes reinforcement of the 66 kv substationat Edwaleni and is estimated to cost about US$3.1 million equivalent ofwhich US$2.5 million equivalent would be foreign exchange.

iv. Part B of the Project would provide for an extension of the66 kv transmission system to supply the Usutu Pulp Company's mill, andaugment supplies to Mbabane. This part of the Project is estimated tocost about US$0.3 million equivalent of which US$0.25 million would beforeign exchange, and is conditional on the signing of a supply agreementwith the Usutu Pulp Company, satisfactory.to the Bank.

V. The Project is technically sound, the estimated cost is reason-able and the construction schedules are realistic.

vi, The Electricity Board is well managed and operated and itsorganization is sound and capable of constructing the Project with theassistance of suitable consultants, and of operating it.

vii. The legislation governing the operations of the Electricity Boardis satisfactory.

viii. SEB's earnings have built up rapidly and are now satisfactory.Due to higher than expected capital expenditure, the Board has had toprolong its use of bank overdraft financing but the financing plan providesfor replacement of the overdraft with long-term finance.

ix. SEB's future earnings should be good and the rate of return isestimated to be at least 11% per annum. Interest and debt service coverage

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should be satisfactory and the Board should be able to finance about 45%of its capital requirements from 1966/67 to 1970/71.

x. The Project is suitable for a Bank loan of US$2.75 millionequivalent for a period of 20 years including a grace period of 4 years.Part B of the Project would be cancelled if the Usutu Pulp Company hasnot entered into a satisfactory agreement to take supplies from the SEBby August 31, 1967.

SWAZILAND

APPRAISAL OF THE DEVELOPMENT PROGRAM

OF THE

SWAZILAND ELECTRICITY BOARD

I* INTRODUCTION

1101 This report covero the appraisal of a project of the SwazilandElectricity Board (SEB), The Project is a part of the Board's developmentprogram for the four years 1966/67 through 1970/71, estimated to cost aboutR3,9 million (US$5.4 million) and is divided into two parts. Part Aconsists of the provision of 11.5 MW of hydroelectric and 5 MW of dieselelectric generating plant. Part B consists of an extension of the 66 kvtransmission system to supply the Usutu Pulp Company's mill and augmentsupplies to Mbabane.

1.02 The estimated cost of Part A of the Project is R2.2 million(US$3.1 million), and the estimated cost of Part B is RO.2 million (US$0.3million), making a total of R2.4 million (US$3.4 million). The Bank hasbeen asked to make a loan of US$2.75 million equivalent to cover theestimated cost of foreign exchange purchases for the Project.

1.03 The borrower would be the Government of Swaziland which would re-lend to the SEB. The loan would be guaranteed by the British Government.

1.04 The Bank has made one previous loan No. 338-SW for US$4.2 millionequivalent to Swaziland which was relent to the Swaziland Electricity'Board for the foreign exchange requirement of their initial installationscomprising the 10 MW hydroelectric station at Edwaleni, provision of 1.5 MWof diesel electric generating plant, and associated transmission and distri-bution works.

1.05 This report is based on feasibility' studies carried out by theBoard's consultants, Messrs, Merz and McLelland and Ninham Shand & Partners,and on the findings of a Bank mission consisting of G.E. Wyatt and A.R.Whytewhich visited Swaziland in July 1966.

II, THE ELECTRIC POWER INDUSTRY OF SWAZILAND

2.01 Prior to the creation of SEB in 1962 the only public supplies ofelectricity in Swaziland were provided by the Public Works Department (PWD)of government under a proclamation issued in 1952, and were limited to thetowns of Mbabane and Manzini. These two towns were separately supplied bya combination of hydroelectric and diesel generating plant totaling about1.7 MW.

2.02 The proclamation creating the SEB in 1962 was amended with theBank's assistance in 1963 during the course of negotiations for Loan No.338-SW. The SEB, which took over 1.0 MW of the PWD generating plant andall its distribution installations, is now the only authorized public sup-plier of electricity-in Swaziland. The capacity of the present generatingplant is 11.5 MW.

Other Electricity Supplies

2.03 The capacity of private generating plants operating in Swazilandis approximately 35 MW, or roughly three times the capacity of the SEB.The reasons for this are partly because public supplies have only becomefreely available in the last two years, but mainly because most of the majorindustrial development in the country is of a type in which electric powercan be obtained most economically by burning by-products of the manufacturingprocess, or by utilizing process steam. Of the 31.6 MW of plant belongingto the eight largest producers, 19.5 MW is installed in sugar or wood pulpfactories and sawmills.

III. THE SWAZILAND ELECTRICITY BOARD

3.01 The SEB was established by proclamation on April 18, 1962, butdid not commence operations until October 1963. It is an autonomous agencyof the Government authorized to generate, transmit and distribute electri-city throughout the territory. It may grant licenses to others for the samepurpose.

3.02 The Board consists of a chairman and five members appointed by theGovernment. Appointments are for three years and are renewable. The presentChairman is a leading business man in the territory.

Organization and Management

3.03 The SEB is well managed by experienced and qualified officers.The thirteen most senior officers are expatriates on three-year contractsmost of which have recently been renewed. The Board has a training programfor local employees up to senior clerk and foreman grade, but it has so farbeen impossible to obtain recruits with adequate educational background fortraining to senior technical or administrative posts.

3.04 The Board employs both civil and mechanical engineering consultantson all major power station developments. Transmission and distributionworks are designed and constructed by the Boardts technical staff who haveadequate training and experience for this work.

3.05 The Chief Executive Officer's contract expires in February 1969and is expected to be renewed. The caliber of the Boardts management andstaff is adequate to carry out the Project, with assistance from consultants.Assurances have been obtained during negotiations that the Bank will beconsulted in the event of any change in the appointment of the Chief Execu-tive Officer. The Bank's approval has been given regarding the appointmentof consultants.

Existing Facilities of SEB

3.o6 The main generating facilities of the SEB consist of 10 W ofhydroelectric plant and 1.5 MW of medium-speed diesel plant for back-upduring low river flow periods in winter. For use in emergencies, there

are in addition 620 KW of portable high-speed diesel generating units takenover from the PWD, and 500 KW of hydroelectric plant which was not takenover from the PWD because of an inadequate water supply. The latter plantis only capable of full output for three or four days at a time, but isavailable to the SEB when required, to supply Mbabane in an emergency.

3.07 The hydroelectric plant consists of four machines of 2.5 MWeach installed at Edwaleni about eight miles southwest of Manzini* Edwaleniis primarily a run-of-river scheme with only 3,000 acre feet of storageat the diversion weir. It takes water from the Little Usutu river anddischarges it into the Great Usutu river. The existing installations weredesigned as the first stage of a 20 NW development.

3.08 The 1.5 IW of diesel plant is installed at Edwaleni in a buildingadjacent to the hydroelectric station. TWo additional diesel generatingunits of 500 KW each are now under construction at Edwaleni. These unitsare being financed by a U.K. Exchequer Loan.

3.09 The SEB transmission system is shown on the map attached as anannex. It consists of a number of 66 kv feeders originating from Edwaleni.Subsidiary transmission and distribution are at 11 kv with a small amountof 6.6 kv in the Big Bend area.

IV. THE POWER MARKET

4.01 Since the SEB has been operating for two full years only, thereis little information available on which to base trends. Sales in theyear ending March 31, 1966, were 78% above those of the previous year duemainly to the extension of supplies to new areas. In IMbabane and Manzini,which are the only two areas which have enjoyed electricity supplies formany years, the increases last year were 39% and 46% respectively. Mbabaneis the seat of government and Manzini the chief commercial and industrialcenter.

4.02 The market for power can be divided into five main categories:Residential, Commercial, Industrial, Special Agreements and Winter Irriga-tion. Annex 1 shows sales under these headings for the two full years ofpast operations 1964/65 and 1965/66, which may be summarized as follows:

Sales in Percentage 1965/66thousands of kwh Increase over Percentage of

Category 1964/65 1965/66 Previous Year Total Sales

Residential 2.478 4 9087 64.9 13.3Commercial 3.268 4t,oo6 22.6 13.0Industrial 5.744 10.579 84.2 34.4Special Agreements 4.347 7.400 70.2 24.0Winter Irrigation L.408 4.696 23305 15.3

Total 17.245 30.768 78.4 100.0

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Irrigation pumping in the summer season is supplied on the standard indus-trial tariff and in winter on an optional special tariff and represents alarge proportion of industrial sales. In the twelve months ending June1966 the combined winter and summer sales for supplies to irrigation pump-ing were 38% of total sales in the period. Almost all of this irrigationis for sugar plantations.

Forecast of Sales

4.03 The forecast of sales for the years 1966/67 to 1972/73 is givenin Annex 1. Developments already in progress enable reasonably close esti-mates to be made for the years 1966/67 and 1967/68. The large increase of46.0% in 1967/68 is due to the connection of Northeast Swaziland to thesystem by a 66 kv line, which will conclude the Board's current program ofmajor extensions into new areas. Thereafter a fairly uniform rate of about8.8% per annum has been assumed based on natural growth and expansion. Ifthe negotiations with the Usutu Pulp Company (see paragraph 4.05) are success-ful, the average will be raised to about 14.0% for the period 1969 through1973. By comparison with other African territories at the same stage ofdevelopment these estimates may be conservative. The Government policy inrecent years has been to concentrate development expenditure on infrastruc-ture but emphasis is now being increasingly placed on the improvement ofeducation and agriculture. This is likely to result in a temporary slowingdown in the rate of increase in electricity demands. Sales for the years1966/67 to 1971/72 only have been used in the financial forecast.

4.04 It is expected that after 1967/68 sales to irrigation pumping willgrow at a slower rate than sales on other tariffs so that the proportion ofsales for this purpose (now 38% of total) will fall. In the industrial andspecial agreement category there are a number of firm demands which havebeen shown, together with probable and possible demands, in Annex 2.

4.05 Negotiations are now in hand between the SEB and the Usutu PulpCompany for a 2 MW supply at a high load factor. The Company has beenoperating its mill for some years with its own generating plant of about8 MW utilizing a by-product as fuel. Owing to changes in the process em-ployed, the plant will not in future produce sufficient fuel to generateat full output. In addition it is proposed to install an oxygen manufactur-ing plant which will increase the demand in 1969. To meet this situation theCompany in January this year asked the SEB to supply 2.0 MW of base loadpower so as to avoid having to increase its own generating plant.

Growth in Demand

4.06 The recorded demand on the SEB system has grown from about 1 MWwhen it started operations in October 1963 to 10.5 MW at 36.7% load factorin the year ending March 1966. The recorded demand, however, is not thetrue system demand because when the Board has had spare generating capacity,it has been the practice to permit one large sugar estate to close down itsprivate plant for overhaul and to take additional supplies from SEB duringthe summer months when river levels are high and back-up thermal plant isstanding idle. Of the peak of 10.5 MW approximately 1.5 NW represents theadditional load of this one sugar estate. This estate has now increasedits generating plant capacity by 4 MW and in future years when the demand

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on the SEBts system approaches the installed capacity this permissionwill be withdrawn. The true system demand is believed to be about 9 IMw,and the load factor about 43%. Future demand has been estimated on theassumption that the system load factor (excluding the base load supplyto Usutu Pulp Company) will rise to about 50% as a result of certain changesin the tariff structure (see paragraph 8.14).

4.07 The relation between system maximum demand and installed plantcapacity and firm plant capacity is shown in the graph as Annex 3. It willbe seen that the true system demand is expected to exceed the present firmcapacity by mid 1967, and the total installed capacity, in early 1968. Fromthis date onward an alternative demand curve has been added indicating whatthe demand is estimated to be if the Usutu Pulp Company load is not obtained.Actual and estimated KWH generated, maximum demand, installed and firm capa-city and load factor are shown in Annex 4h

V, NEi PLANT REQUIREMENTS

5.01 Although the existing hydroelectric installations at Edwaleniwere designed for extension to double their present capacity, subsequentriver gaugings, and development of the high-grade semi-bituminous coalfield, now under way at Mpaka, have necessitated a re-evaluation of theProject. To this end a comparison with the costs of generation by dieseland coal-fired steam stations has been carried out by the consultants. Theresults of this exercise are shown in Annex 5. They show that with thesmall size of units required up to a system maximum demand of about 22 MW,it is most economical to extend the Edwaleni Station to 15 MW, add the6.5 MW Magaduza unit utilizing the discharge from Edwaleni, and firm upthe hydro power with an additional 5 NW of diesel generation in the low flowperiods in winter. In accordance with this re-evaluation it is now proposedto construct the 6.5 IW hydroelectric station at Magaduza downstream ofEdwaleni, to be followed immediately by an additional 5 MW hydroelectricunit at Edwaleni.

5.02 The earliest date at which the hydroelectric additions can becommissioned is early 1969. To meet the expected plant shortage in 1967and 1968, it is proposed to install 5 MW of diesel plant thus increasing thetotal installed thermal capacity to 7,5 MW.

5.03 The proposed additions of 11.5 MN of hydroelectric and 5 MW ofdiesel-electric generating plant would provide adequate capacity to meetestimated demands up to 1972 or 1973. For future planning it will benecessary to compare the economics of coal-fired steam generation withfurther development of the hydroelectric resources of the country includ-ing provision of major water storage.

VI. THE PROJECT

6.01 The project proposed for Bank financing would consist of twoparts. The first, Part A, consists of provision of 5 TIW of diesel plant,the construction of the 6.5 MW hydroelectric station at Magaduza, and a

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5 MW extension of the existing Edwaleni hydroelectric station. The second,Part B, consists of the construction of a 66 kv line from Edwaleni to theUsutu Pulp Mill and from thence to Mhlambanyati where it would connect upwith the existing 66 kv line from Edwaleni. The diesel installation wouldconsist of two units of 2.5 14W each. They would be installed at Edwaleniin a new building adjacent to the hydroelectric station. The buildingwould be of reinforced concrete to match the existing buildings. Themachines would feed into the 66 kv network through the existing step-upsub-station.

6.02 The Magaduza Station would utilize the discharge of the Edwalenistation. Approximately 3 miles of canal designed to carry 525 cusecs, butcapable of enlargement to 700 cusecs, would end in a headpond of approxi-mately 60 acre feet capacity 200 feet above the power station site on theleft bank of the Great Usutu river, one mile above its confluence with theLittle Usutu. A single Francis turbine with generator of 6.5 IW capacitywould be installed in an outdoor power station. The generator would feedinto the Edwaleni Big Bend 66 kv line through a step-up transformer atMagaduza and four miles of 66 kv line to be constructed by the SEB with itsown funds. The possibility of remote control from Edwaleni would be con-sidered in the final stages of design.

6.03 The addition of a 5 MW unit at Edwaleni would only involve minorcivil engineering work, comprising the addition of a small conduit, surgetower and penstock, and an extension of the present reinforced concretebuilding.

6.04 The hydroelectric units at Magaduza and Edwaleni would operate asbase load plant. The diesel plant would operate for some years as back-upplant only during the low river flow period from June to October. Inlater years the diesel plant would also be used as peaking plant.

6.05 Although the Usutu River rises in the Republic of South Africaand after passing through Swaziland flows into Mozambique, there are atpresent no international agreements governing the use of its waters.However it is expected that an agreement will shortly be reached with theRepublic over division of that part of the river flow which arises in theRepublic. Since the inflow from the Republic is small exceptin times of flood, and the Project has been based primarily on the use ofriver flows arising from within Swaziland, the effect on the Project ofabstractions in the Republic would be negligible. In the case of Mozam-bique, demands for an increased share of the Usutu waters would not adversel3affect the flows available for the Project.

6.06 The SEB present water permit authorizes the use of 400cusecs from the Little Usutu and 200 cusecs from the Great Usutu rivers.This is more than enough to operate the existing plant with the proposedadditions, at full capacity. A clause in the water permit states that thepermit may be varied or withdrawn at any time. However, as a result ofrepresentation by the Bank the Government has now agreed to delete thisclause. The Government has at the same time given an assurance that it

will not authorize the abstraction of more than an additional 30 cusecs forirrigation, upstream of Edwaleni, until such time as upstream storage hasbeen provided. These arrangements are considered adequate to secure theeconomic operation of the Project.

6.07 The construction of the 66 kv transmission line extension, com-prising Part B of the Project, is conditional upon the Usutu Pulp Companysigning a long-term agreement containing satisfactory assurances withregard to limitation of maximum demand and a minimum return. It wouldinvolve additions to the existing 66 kv sub-stations at Edwaleni andMbabane, conversion of the Mhlambanyati sub-station from 11 kv to 66 kv,construction of a new 66 kv sub-station at Usutu Pulp Company and construc-tion of 30 miles of single circuit 66 kv line on wood portal structures. Bycompleting the ring main from Edwaleni it would greatly enhance the securityof supplies to Mbabane and at the same time augment the available suppliesfor future expansion of the town.

Status of Engineering and Procurement

6.08 Messrs. Ninham Shand and Partners on the civil side, andMessrs. Merz & McLelland on the electrical and mechanical side, have beenappointed as consultants for design and supervision of all the hydroelectricand civil works contained in the Project. Purchasing documents are beingprepared and bids are being invited by the Crown Agents in London in accord-ance with the Bank's "Guidelines Relating to Procurement." Both the civiland mechanical consultants were responsible for the satisfactory completionof the original Edwaleni Scheme. No construction work has been started onthe Project.

Construction Schedules

6.og It will be necessary to proceed immediately with purchase of thediesel plant and design of the civil works and hydroelectric installations.If there are no unforeseen delays it is expected that the 5 MW of dieselplant could be commissioned at the end of 1967 or early in 1968, Magaduzaby the end of March 1969 and the Edwaleni extension by the end of March 1970Recent experience with construction of the original hydroelectric stationat Edwaleni indicates there should be no difficulty in keeping to thisschedule, and in fact the SEB program allows for some improvement on thesedates.

Estimated Cost

6.10 The total estimated cost of the Project and the estimated costof the principal features are shown in the following table. A more detailedbreakdown of cost is given in Annex 6.

Foreign Local Total CostCost Cost expressed inUS$ US$ US$ Rand

(expressed in thousands)

Part A

Civil works 813 392 1,205 861Diesel generating plant 462 15 h77 34 1Hydroelectric generating plant 553 7 560 400Electrical equipment 234 42 276 197Engineering and supervision 232 49 281 200Contingencies 206 45 251 179

Total 2,500 550 3,050 2,178

Part B

Transmission works 222 55 277 198Engineering - 28 28 20Contingencies 28 3 31 22

Total 250 86 336 240

GRAND TOTAL 2,750 636 3,386 2,118

6.11 The cost of the Project does not include interest during construc-tion which will be met from revenue. The provision of 9% for contingenciesin Part A and 10% in Part B is considered adequate to meet any unforeseendifficulties or price increases which may arise during the construction ofthe Project. Materials to be imported for the Project with a few minorexceptions are free of customs duties. The estimates are realistic.

Unit Costs and Generating Costs

6el2 The installed cost per kw of new plant being added under Part Aof the Project is given in the following table. Corresponding costs forthe existing plant financed by the first Bank loan are given for comparison.

Project Cost Per kw installed in US$Edwaleni Magaduza Diesel

Project 174 200 132Existing installation 360 - 190

VII. ADDITIONAL EXPANSION WORKS

7.01 Concurrently with the construction of the Project the SEB will becarrying out the following works to complete the development programscheduled for the years 1966/67 through 1970/71.

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Additional Works Scheduled for thePeriod 1966/67 - 1970/71

Estimated Cost Expressedin thousands of

US$ Rands

GenerationAddition of two 500 kw diesel

generators now under construction 119 85Transmiss' on

Extensions to 66 kv lines 3h3 245Extension of 66 kv sub-station 169 121

DistributionExtensions to 11 kv lines 216 154Extension of 11 kv sub-station and

low voltage lines 867 620Meters and services 11 8

MiscellaneousBuildings 1h0 100Transport, radio and tools, etc. 73 52

Engineering and Supervision 77 55Contingencies 52 37

2,067 1,477

Notes:

1. These costs do not include interest during construction or provisionfor increase in working capital.

2. Depending on the rate of growth in demand it may be necessary duringthe period of construction of the Project to incur preliminary expendi-ture on engineering and design of a major thermal station or additionalhydroelectric facilities involving major storage.

VIII. FINANCIAL ASPECTS

Past Earnings

8.01 Since it began selling power in 1963, the Board's operations haveexpanded rapidly. For the first two years the growth was slower than ex-pected at the time of the first Bank loan but 1965/66 sales and operatingrevenues exceeded the original estimate. However, maintenance expenditureon the Manzini and Mbabane distribution systems resulted in higher operatingcosts so that net income and the return on the Board's assets were lower thaestimated, though it happened that cash earnings for 1965/66 were virtuallyunchanged. The following table compares the estimates given in theappraisal report for Loan 338-SW with the actual results details of whichare given in the income statements, Annex 7.

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1963/64 1964/65 1965/66App. App. App.Report Actual Report Actual Report Actual

Sales in millions of kwh 4.9 3.0 19.9 17.2 29.2 30.8

( in thousands of Rands)

Operating revenues 123 91 498 411 584 645Operating expenses 75 73 90 127 102 164Depreciation 10 8 64 84 100 147Net operating income 38 10 344 200 382 334

Return on average netfixed assets in operation 9.2% 7.7%

8.02 Although the Board's earnings have been satisfactory its cashposition until now has been difficult. Over the three years cash genera-tion was some R150,000 lower than expected, and while expenditure on theEdwaleni Project was very close to the estimate, other fixed and workingcapital requirements not originally provided for amounted to some R820,000.In the absence of further long-term finance the Board had to continue itsreliance on bank overdraft which was intended originally to be only aninterim measure. At March 31, 1966, the bank overdraft was R228,000.

Present Financial Position

8.03 The Board's audited balance sheets for the last three years aregiven in Annex 8. The following is a summary of the balance sheet as atMarch 31, 1966:

(expressed in thousands of Rands)ASSETS

Fixed assets at cost 4,738Less: accumulated depreciation 232

Work-in-progress 15Current assets:

Inventories, receivables, etc. 181Deposit with Crown Agents 172 353

TOTAL ASSETS 474LIABILITIES

Reserves 125Long-term debt:

6-1/2% 20-year Notes 1,000Government Loan No. 1 116Government Loan NTo. 2 250

I U NTo. 3* 2,893 4,259Current liabilities:

Bank overdraft 228Long-term debt payments due

within one year 111Payables, etc. 151 490

TOTAL LIABILITIES 4,874

* Represents IBRD Loan No. 338-SW which was relent by the Government tothe Board.

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8.04 The 6-1/2% 20-year Notes were issued in 1963 and 1964 to some 25private investors most of whom are residents of South Africa. The Notesare repayable in 20 annual installments of R50,000 commencing in June 1967.The Notes are guaranteed by the Swaziland Government as to payment of prin-cipal and interest.

8.05 The Swaziland Government Loan No. 1 for R120,000 was issued in1965 in exchange for the acquisition of the Manzini and Mbabane undertakingsat 6-1/2% interest with repayment over 25 years.

8.06 Loan No. 2, which was relent to the Board from the proceeds ofa U.K. Exchequer loan, was obtained to finance the extension to N.E. Swazilanexpenditure on which will be completed by March 31, 1967. The loan is fora total of R400,000 of which R250,000 had been drawn up to March 31, 1966,at 6-5/8% interest and R150,000 was drawn in July 1966 at 7% interest.Repayment will be by 22 equal annuities commencing in March 1970 in thecase of the first tranche, and in July 1970 in the case of the secondtranche.

8.07 The third Government Loan was relent from the proceeds of IBRDLoan No. 338-SW for US$4.2 million (R3.0 million) which was fully drawnat March 31, 1966. Interest is at 5-1/2% and repayment is over seventeenyears commencing in 1966.

8.08 The average rate of interest on the Board's long-term debt isabout 6%.

8.09 The bank overdraft, which stood at R228,000 at March 31, 1966,carries interest at 1% above the South African Bank rate which is now 6%.The overdraft facility is R200,000 but the Board has been allowed toexceed this for short periods.

8.10 The Board has raised the following loans from sources withinSwaziland since March 31, 1966:

Lender Amount Interest Repayment

Unified Teaching ServiceProvident Fund R25,000 6.5% 20 annual install-

ments commencing1967/68

Unified Teaching ServiceProvident Fund R20,000 6.5% in full 1971/72

Railway Gratuity Scheme R10,000 6.5% in full 1971/72

R55,000

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Tariffs

8.11 The Board has power to set its own tariffs. The Proclamationstates that revenues shall exceed outgoings including provision fordepreciation or loan redemption, whichever is the greater, and allocationsto reserve. It also states that the Board will not fix such tariffs aswill result in the creation of reserves unreasonably in excess of thoserequired for the proper discharge of the Board's functions. Under LoanNo. 338-SW the Board was required to make reasonable allocations to reservesand these are defined as those which would amount to not less than 40% ofthe total operating expenses, interest and repayments on long-term indebted-ness or depreciation, whichever is the greater. The computation was to bemade every three years for the succeeding three-year period.

8.12 The tariff requirement under Loan No. 338-SW suited the Board'ssituation at the time and its results have been reasonably successful.However, now that the Board has been operating for some years and hasestablished the value of its assets, this test is no longer appropriate. Ithas been replaced by one related to the value of the Board's investmentand the Board will be required to maintain tariffs sufficient to produce arate of return of not less than 9% on its average net fixed assets in operatiori

8.13 In addition some anomalies in the tariff structure have becomeapparent. In particular the charges for domestic supply appear to be toolow in relation to those for industrial supply'. Applied to sales in 1965/66average charges per KWH were as follows:

Rand cents

Domestic 2,20Commercial 2.60Industrial 2.33Winter irrigation 2.25Special agreement 1.76

8.14 The anomalies of the present tariffs would have an increasinglybad effect on load factor. The Board has therefore agreed to carry out withthe assistance of consultants acceptable to the Bank a review of itstariff structure within the next two years and to implement such recommen-dations as may appear desirable after consultation with the Bank.

Accounting and Audit

8.l5 The Board has a sound accounting system, a qualified and capablechief financial officer and a staff well suited to the size of the under-taking. The audit is carried out by Alex, Aitken and Carter of Johannes-burg who also act from time to time as financial advisers to the Board.Assurances have been received that the audit will continue to be carriedout by independent auditors acceptable to the Bank and that certifiedcopies of the annual financial statements and auditors' report will betransmitted to the Bank within four months of the close of the fiscal year.

- 13 -

Financing Plan

8.16 The following is a summary of estimated sources and applicationsof funds for the period 1966/67 to 1970/71 (Annex 9):

(in thousands of Rands)

SOURCESCash earnings 4,395Less: debt service 2,604

Net Internal Cash Generation 1,791Deposit with Crown Agents 172

Borrowings:Swaziland Government Loan No. 2 (balance) 150Proposed IBRD Loan 1,964Additional long-term loan 400Other loans 110

2,624

TOTAL SOURCES

APPLICATIONSProposed project 2,418Extension to NE. Swaziland 423Other works 1,054

Total Construction Expenditure 3,895

Reduction in bank overdraft 228Increase in working capital other than cash __6_

TOTAL APPLICATIONS 4,191

Cash accrual 396

Percentage of capital requirements financedfrom net internal cash generation 1,96 = 4502%

8.17 The proposed Bank loan of US$2.75 million is assumed to be for aterm of 20 years including a grace period of 4 years with interest at 6%.The loan would amount to 81% of the cost of the Project and to 50% oftotal construction expenditure during the period.

8.18 The U.K. Government has agreed to provide the additional long-termloan of R1400,OOO by March 31, 1968, if the Board is unable to obtain aloan on reasonable terms elsewhere. However, the Board intends to raisethis amount from private sources in South Africa before that date if con-ditions become more favorable than they are at present. In order to coveritself against any temporary shortage of funds, the Board has obtained a

commitment from its bankers to provide bridging finance of R500,000 at 2%above South African Bank rate. This commitment is firm for 12 monthsand is additional to the overdraft facility of R200,000.

8.19 While the precise sources of finance may remain open until March1968 sufficient loan funds will be available in view of the amountassured by the U.K. Exchequer. In preparing the financial forecasts theterms assumed for the loan of R400,000 are interest at 7-1/2% and a repay-ment period of 17 years commencing in 1970.

8.20 The other loans comprise the loans totaling R55,000 wihich theBoard has already obtained (see paragraph 8.10). The Board plans to raisethe remaining R55,000 from within Swaziland and should have no difficultyin doing so.

8.21 The provision of long-term finance should enable the Board toclear its overdraft during 1969/70. The forecasts show a cash accumulationof R396,000 at March 31, 1971, and of R627,000 at March 31, 1972. Thiscash would be required for the next stage of the Boardls expansion butthe cost cannot be estimated at the present time.

8.22 The Board will contribute a satisfactory proportion of itscapital requirements out of earnings. During the period 1966/67 to 1970/71the proportion would be about 45%, while from 1966/67 to 1969/70, theperiod of construction of the Project, it would be about 36%.

Future Earnings

8.23 Estimated income statements for the period 1966/67 to 1971/72are shown in Annex 7. They are based on the following principal assump-tions:

(a) Sales are in accordance with the forecast given in Annex 1(see paragraph 4.03);

(b) Operating revenues are calculated on existing tariffs and from1968/69 on a basic tariff to the Usutu Pulp Company of 1 Rcent per kwh;

(c) Operating administration and maintenance expenses are based onpresent costs with allowances for additional staff and for anincrease of 5% per annum;

(d) Fuel costs are calculated at 0.9 R cents per kwh of dieselgeneration;

(e) Depreciation is calculated on a straight-line basis accordingto the estimated life of the main categories of assets.

8.24 Future earnings should be satisfactory. The rate of return isestimated to increase from 7.7% in 1966/67 to 11.0% or over for the remain-der of the period.

- 15 -

8.25 Interest coverage would increase from 1.2 times in 1966/67 to1.7 times in 1967/68 and by 1971/72 coverage should be 2.3 times. Debtservice coverage would be about 1.8 times from 1968/69 onwards.

Future Financial Position

8.26 The forecast balance sheets in Annex 8 show that the financialposition of the Board will be satisfactory although with equity accumulationsarising only from earnings, the ratio of debt to equity will remain high forthe foreseeable future. At March 31, 1972, the debt/equity ratio isestimated to be 74/26.

Effect of Cancellation of Part B of the Project

8.27 Annex 10 shows the main effects on the Board's earnings and finan-cial position if Part B of the Project is not constructed (see paragraphs 6.06and 6.09), thereby- reducing the proposed loan to US$2.5 million (Rl.8 million).Although earnings would be reduced, the return on the Board's net fixed assetsin operation would still be satisfactory at about 9.5% from 1968/69 to 1971/72.The need for bank overdraft would be extended slightly and the cash accumu-lation by March 31, 1972, would be reduced to R169,000 but the financingplan would remain sound. Debt service coverage would be adequate at atleast 1.5 times from 1968/69 through 1971/72 and the debt/equity ratio atMarch 31, 1972, would be 78/22.

Debt Limitation

8.28 Under the previous Loan Agreement, the Board is prohibited fromincurring long-term debt without the Bank's prior approval if its netrevenues after depreciation but before interest for the preceding twelve-month period are less than twice maximum interest requirements. The mainpurpose of this covenant was to supplement the rate covenant in ensuringthat interest charges would be amply covered by earnings. At the time ofthe last loan the Board's future expansion and capital requirements wereundetermined. However it was expected that additional borrowing wouldnot be required before 1970 by when the Board should have accumulated sub-stantial equity out of earnings and would be able to satisfy the debt limi-tation covenant for the small amount of borrowing then assumed.

8.29 In fact, however, the Board's borrowing requirements greatlyexceeded the earlier estimates with the result that the proportion of debtto capitalization will remain high for the foreseeable future. The existingcovenant would effectively prevent the Board incurring additional long-term debt without the Bank's prior approval but the form of the covenantis no longer appropriate to the Board's circumstances and it does not covershort-term borrowings. It has therefore been replaced by a general limi-tation whereby-the Board is required to obtain the Bank's approval beforeincurring any debt, short or long-term. However the Board is permitted toincur without the Bank's prior approval the amount of R500,000 required forpurposes of the Project to be funded not later than M4arch 31, 1968, by alike amount of debt on terms and conditions satisfactory to the Bank, andadditional loans not exceeding R400,000 in the aggregate outstanding atany one time.

- 16 -

IX. JUSTIFICATION OF THE PROJECT

9.01 The Project is needed to meet the growing demands for electricityin Swaziland, The proposed facilities represent the most economical meansby which to increase the generating capacity (see Annex 5).

X. CONCLUSIONS

10.01 The Project is technically sound, the estimated cost is reasonableand the construction schedules are realistic.

10.02 The Project is necessary to meet the anticipated growth of loadin Swaziland. There is no alternative method of meeting these requirementswhich would compare favorably on an economic basis.

10.03 The Swaziland Electricity Board is efficiently managed, itsorganization is sound and it is fully capable of carrying out the Projectwith the assistance of its consultants.

10.04 Apart from continued reliance on bank overdraft, SEB's presentfinancial position is satisfactory. The financing plan for the periodcovering the Project is sound and provides for adequate working capitaland elimination of the overdraft.

10.05 SEB's future earnings are estimated to be good and the rate ofreturn should be at least 11% per annum. Interest and debt service coverageshould be satisfactory and the Board should be able to finance a reasonableproportion of its capital requirements out of earnings.

10.06 The Project is suitable for a Bank loan of US$2.75 million for aperiod of twenty years including a grace period of four years providedthat withdrawals from the loan for Part B of the Project are conditionalon completion of an agreement between the Usutu Pulp Company and the SEBfor supplies of electricity on terms satisfactory to the Bank (paragraph 6.07,

March 15, 1967

SWAZILAND ELECTRICITY BOARD

Actual and Estiranted Sales 1964/6,0,,972/73

(Thousands of KWH)

SPECIAL WINTERRESIDENTIAL C4MERCIAL INDUSTRIAL AGREEMENT IRRIGATION TOTAL SALESPercentage Percentage Percentage Percentage Percentage FercentageYears KWH Increase KWH Increase KWH Increase KWH Increase KWH Increase KWH IncreaseEndinz March 31st Per Annum Per Annum Per Annum Per Annum Per Annum Per Annum

ACTUAL SALES

1965 2,478 3,268 5,744 4,347 1,408 17,2451966 4,087 64.9 4,oo6 22.6 10,579 84.2 7,400 70.2 4,696 233.5 30,768 78.4

ESTIMATED SALES

1967 4,559 11.5 4,407 10.0 12,979 22.7 7,000 1/ - 6,270 33.5 35,215 1l4.51968 5,279 15.8 4,848 10.0 18,388 41.7 7,350 5.o 15,497 147.2 51,362 l 6

.0

1969 5,878 11.3 5,333 10.0 19,790 7.6 19,718 2/ 168.3 17,167 10.8 67,886 32.21970 6,547 311.4 5,866 10.0 21,320 7.7 24,104 22.2 18,884 10.0 76,721 13.01971 7,294 11.4 6,452 10.0 22,990 7.8 28,509 18.3 20,768 10.0 86,013 12.11972 8,128 11.4 7,097 10.0 24,815 7.9 28,934 1.5 22,845 10.0 91,819 6.71973 9,060 11.5 7,807 10.0 26,812 8.o 29,381 1.5 25,130 10.0 98,190 6.9

AVERAGE ANNUALINCREASE %

1967 - 1970 12.5 10.0 .19.2 51.0 42.0 29.71970 - 1973 11.4 io.o 7.9 6.8 10.0 8.6

j Reduction due to consumer (Ubombo Sugar Mill) adding 14 MW steam unit to private plant (previously 4 MW now 8 MW).2/ Addition of Usutu Pulp Company's Mill in April 1968

March 7, 1967

SWAZILAND ELECTRICITY BOARD ANNEX 2

Additional Industrial LoadsEstimated Maximum Demand in KW

1965/6 6/7 1966/8 168/9 RemarksFirm Demands

Brewery 50 At Matsapa near Manzini.Oxygen bottling 100 i fMatch manufacture 100 itCotton seed oil 50Chemical 50P.W.D. workshops 50 "Waterworks 100Colliery 150 350 Gradual development.Atom bomb detection unit 400Tambankulu sugar

irrigation 700Sub-Total 100 1,150 850 -

Planned DemandsMhlume sugar irrigation 500 500S.I.S. rice irrigation 500Cement grinding mill 500 At Matsapa.Tannery 50 itUsutu Pulp Mill 2,000 Extension of existing millProbable DemandsIndustrial alcohol plant 500 Based on molasses from

sugar estates.Textile factory 200 At Matsapa.Furniture manufacture 100 "Insecticide 100Fruit canning 500Nsoso sugar irrigation 500Hospital 300Havelock asbestos mine 6,000 TW.ould also bring 10,300 kw

generating plant on systemPossible Future DemandsIron ore pelletising To overcome accumulation

of fines.

Timber processing Extensive areas of forest-ry plantations reachingmaturity.

Anthracite mine Valuable deposits at Mal-oma in South Swaziland.

Grand Total 100 2,150 3,300 8,800

March 7, 1967

ANNEX 3

SWAZILAND ELECTRICITY BOARDSYSTEM CAPACITY AND DEMAND(MEGAWATTS)

35 I I 35

0 wIz

z -J

20~~~~~~~~~~~~. 201 -2

0~ ~~~3

Z INSTALLED I L _ _ _ J~~~o z , LETMAE

30 3

u _ ) < , - - WITHOUT PART

10~ ~~~~~~D -,_____ ____E 10__

0cL W

:)w

0E

25 TT I 1 25CZ,

I-z

20 N 20

10 10~~~~~~~~~ l

:z, INSTALLED ESTIDWAENIDIEELA,00ED

DiFFERENCE OF 7,000 KW BETWEEN INSTALLED AND FIRM CAPACITY

2. UNDER THE WORST DRY SEASON CONDITIONS IT IS ESTIMATED THAT THE MAXIMUM CAPABILITYOF THE COMBINED THERMAL AND HYDRO PLANT WOULD BE REDUCED TO THE LEVEL OFTHE FIRM CAPACITY SHOWN ABOVE.

1965 1966 1967 1968 1969 1970 1971 1972 1973

YEAR ENDING MARCH 31

(2R)IBRD-3106

SVTAZILAND ELECTRICITY BOARD

System KWH, Load Factor and Plant Statistics

System Total Total InstalledUnits Units Units System NkTaximum Load 1/ Installed Plant

Generated Sent Out Sold Losses Demand Factor Plant Firm Capacitym. m. m. %N taW % [JAI

Year ending31st March

1961 VA NA 2.5 t'A NA NA 1.4 0.91962 NA WA 2.9 NA NA NA 1.4 0.91963 N,IA NA 4.4 NA NA NA 1.4 0.91964 NA NA 6.6 NA 1 NA 2.4 1.91965 20 19.3 17.2 12.4 7.4 31 11.5 9.01966 33.8 33.4 30.8 8.9 9.0 / 43 11.5 9.0

1967 39 38.8 35.2 9.3 9.7 46 12.5 10.01968, 57.5 55.9 51.4 10.6 12.8 50 17.5 15.01969 76,o 68.4 67., 10.7 16.o 5t 22.0 / 17.51970 85.9 83.1 76.7 10.7 17,7 59 29.0 22.0 4/1971 9614 93.3 86.0 10.7 18.B 59 29.0 22.01972 103 92.5 91.8 10.7 20.3 55 29.0 22.0

71973 111 106.1 98.2 10.7 22.0 57 29.0 ?2.0

1/ Load factor is calculated to nearest whole figure using units generated./ Actual Demand was 10.5 MWnIJ due to temporary shutting down of private generating plant at UTborbo Sugar

Mill, at which demand the load factor would be 36.7%.

y/ Magaduza only 4.5 1-W effective until Edwaleni complete.v With one\5 NW set at Edwaleni out of commission, system loss is 7 MVT due to loss f water at Magaduza.

Niote: The Swaziland Electricity Board commenced operations in 1963.

March 7, 1967

SWAZILAND ELECTRICITY BOARDComparative Costs of Alte.native Means of Generation

(Costs in US$)

Hydro-Electric withDiesel Steam diesel back-up

Plant installed 4 x 2.5 MQW 2 x 5 MW 1 x U lmCapital Cost 1,960,000 2,94o0,000 3,040,000Life of Plant in years 15 25 40Amortization by Sinking Fund (interest 8%) 3.68% 1.37% 0.38%Interest on Capital 8% 8% 8%Type of fuel Industrial Diesel Coal Industrial DieselCalorific value of fuel (Btu's per lbs) 18,600 10,400 18,600Cost of fuel per ton (2240 lbs) $ 33.30 $ 4.7 $ 33.30Gross Units generated in millions 16.8 18.5 15.4 Hydro -z 1.4 DieselConsumption of fuel per kwh generated (gross) 0.55 1.79 0.55

Annual Cost(In first full year of operation 1969/70 with output of 16.8 million kwh)

Fixed charges on Capital 228.900 275.500 254.700Fuel 137.200 69.500 11.440Salaries and Wages 14.000 42.000 4.200Repairs and maintenance 8.400 23.800 2.800Other Costs. 1.400 4.500 1.400

Total 389.900 415.300 274.500Cost per kwh sent out in US Mils 23.2 24.7 16.3Note 1 With greater utilization in later years the cost per kwh sent out will be reduced to a greater

extent in the case of the hydro-electric alternative than for thermal, thus strengthening thecase for hydro still more.

Note 2 It is readily apparent from the above that the hydro-electric installation with diesel back-upis more economical than an installation comprising diesel plant only. A comparison by thediscounted cash flow method confirms this and shows that the costs of the alternative instal-lations would be equal (over the life of the hydro-electric plant ) when discounted at 50.5% forPart A of the ProJect and at a higher percentage if Part B is includedo

Note 3 In the case of Diesel and Hydrcelectric alternatives the new plant will form an extonsion ofan,existing station. Staffing requirements are therefore much less than for a new steam station.

(March 7, 1967

SWAZILAND ELECTRICITY BOARD ANNEX 6

Estimated Cost of the Project

(expressed in thousands)

Foreign Local Total CostExchange Gurrency c-x ressed inL-

PART A US$ Us$ uS$ Rand

EDWALENI DIESEL PLANT

Diesel installation (2 x 21½ MW) 462 15 477 341Switchgear and switchyard 74 10 84 60Power house extension 21 21 42 30Engineering 62 4 66 47Contingencies 56 4 60 43

7I 54 __ 52

EDWALENI HYDRO PLANT

Hydro installation 249 3 252 180Switchgear and switchyard 84 14 98 70Power house and tailrace 11 10 21 15Conduit and surge shaft etc. 406 28 434 310Engineering 83 6 89 63Contingencies 74 6 80 57

227 67 97 695

MAGADUZA HYDRO PLANT

Hydro installation 304 4 308 220Switchgear and transformer 76 18 94 67Canal pondage and penstock 352 290 642 458Access road and servitudes 8 29 37 27Power station 15 14 29 21Engineering 87 39 126 90Contingencies 76 35 111 79

_ _ 1,3 _

TOTAL PART A $2,500 $550 $3,050 R2,178

PART B66 kv Transmission Line 105 35 140 10066 kv Sub-stations 117 20 137 98Engineering 28 28 20Contingencies 28 3 31 22

TOTAL PART B 250 86 336 240

GRAND TOTAL $2,750 $636 $3,386 R2,1418

March 7, 1967

SWAZILAND ELECTRICITY BOARD

Income Statements(expressed in thousands of Rands)

-- ACTUAL ---------- ----------------------------- ESTIMATED -------------------------Year ending March 31 1964 1965 1966 1967 1968 1969 1970 1971 1972Sales mn millions of kwh 3.0 17.2 30.8 35.2 51.4 67.9 76.7 86.o 91.8Average revenue per kwh in R. cents - 3.00 2.36 2.12 2.11 2.02 1.84 1.75 1.68 1.66Operating revenues 91 411 645 -/ 744 1,038 1,247 1,346 1,449 1,525Operating expenses:

Operating, administration and maintenarce 47 116 154 186 209 239 254 278 305Fuel 26 10 10 21 50 86 58 48 55Depreciation 8 85 147 173 206 243 281 316 327Total Operating Expenses 81 211 311 380 465 568 593 642 687

Net income from operations 10 200 334 364 573 679 753 807 838Interest 101 174 235 303 330 353 369 374 358Less: interest capitalized 91

Interest Charged to Operations 10 174 235 303 330 353 369 374 358Net income after interest 26 99 61 243 326 384 433 480Times interest covered 1.1 1.4 1.2 1.7 1.9 2.0 2.2 2.3Return on average net fixed assets in operation 7.8% 7.7% 11.1% 11.4% 11.0% 11.2% 11.7%

1/ The fall in average revenue from 1967 through 1971 is due to sales to the Usutu Pulp Co.

March 15, 1967

SWAZILAND ELECTRICITY BOARD

Balance Sheets(expressed in thousands of Rands)

-- ACTUAL ---------- --------------------------- ESTIMATED --------------------------As at March 31 1964 1965 1966 1967 1968 1969 1970 1971 1972ASSETSFixed assets at cost, 293 4,140 4,738 5,352 5,995 7,344 8,371 8,648 8,898Less: accumulated depreciation 9 85 232 405 611 854 1,135 1,451 1,778

Net Fixed Assets in Operation 284 4,055 4,506 4,947 5,384 6,490 7,236 7,197 7,120Work in progress 2,195 15 25 525 145Current Assets:

Inventories, receivables, etc. 72 161 181 193 222 240 250 260 268Cash 132 396 627Deposit with Crown Agents

172

Total Current Assets 72 161 353 193 222 240 382 656 895TOTAL ASSETS 2,551 4,216 4,874 5,165 6,131 6,875 7,618 7,853 8,015

LIABILITIESReserves

26 125 186 429 755 1,139 1,572 2,052

Long-term debt:64 20 year notes 607 1,000 1,000 950 goo 850 800 750 700Governsmert - Loan 1 120 116 114 112 109 106 103 99Government - Loan 2 250 400 400 392 383 373 362Government - Loan 3 (IBRD Ioan 338-SW) 1,073 2,615 2,893 2,783 2,665 2,540 2,408 2,269 2,123Proposed IBRD Loan

733 1,317 1,885 1,853 1,771Additional long-term loans 100 400 400 388 375 361Other loans 54 108 107 106 75 74

Total Long-Term Dabt 1,680 3,735 4,259 4,401 5,318 5,715 6,076 5,798 5,490

Current Liabilities:Bank overdraft 451 219 228 261 57 60Long-term debt payment due within one year, 111 163 171 187 243 321 308Payables, etc 420 236 151 154 156 158 160 162 165

Total Current Liabilities 871 455 490 578 384 4O5 403 483 473TOTAL LIABILITIES 2,551 4,216 4,874 5,165 6,131 6,875 7,618 7,853 8,015

Debt/equity ratio 100/0 99/1 97/3 96/4 93/7 89/11 85/15 80/20 74/26

March 15, 1967

S,iAZILAND ELECTPICITY BOARD

Sources and Applications of Funds(Expressed in thousands of Rands)

- ------ ACTUAL ---------- --------------------------------- ESTIM ATED -----------Year ending March 31 1964 1965 1966 1967 1968 1969 1970 1971 1967/71 1972

SOURCESNet operating income 10 192 334 364 573 679 753 807 3,176 838Add: depreciation 8 84 147 173 206 243 281 316 1,219 327

Cash Earnings 18 276 181 537 779 922 1,034 1,123 4,395 1,165

Deposit with Crown Agents 172 172

Borrowings:6h% 20 year notes 607 393Government - Loan 1 120Goverment - Loan 2 250 150 150Government - Loan 3 V 1,073 1,542 385Proposed IBRD Loan 733 584 604 43 1,964Additional long-term loans 100 300 400Other loans 55 55 noBank overdraft 451 9 33 3 36

Total Borrowings 2.131 2,055 644 338 1,088 587 604 43 2,660

TOTAL SOURCES 2,149 2.331 1,125 iLo47 1,867 1509 1.638 1.166 7.227 i1.65

APPLICATICNSEdwalei project 2,195 1,304 389Land, buildings, distribution, etc. 201 228 189 156 161 211 211 230 969 250Purchase of undertakings 120NE Swasiland - Transmission 20 373 50 423Additional generation - (diesels) 85 85IBRD project 15 10 932 758 671 47 2,418

Total Construction 2,396 1,652 613 624 1,143 969 882 277 3,895 250

Reduction in bank overdraft 232 204 60 264

Debt service:Interest -&6% notes 41 61 65 65 63 60 56 53 29? 50- Government - Loan 1 16 8 8 7 7 46 7- Goverrment - Loan 2 1 25 27 27 27 26 132 25- Government - Loan 3 V 40 98 156 162 156 150 143 135 746 128- Prposed rBRD Loan 29 66 98 117 310 114- Additional long-term loans 19 30 30 30 30 139 29-Other loans 1 6 8 6 6 27 5- Overdraft 20 15 13 15 11 4 2 32

Total Interest 1(1 174 235 303 330 353 369 37h 1,729 358

Aiortisation - 60 notes 50 50 50 5O 200 50- Gover-mnt - Loan 1 4 2 2 3 3 14 3- Government - Loan 2 8 9 17 10- Government - Loan 3 107 11o 118 125 132 592 139- Proposed IBRD Loan 36 36 75- Additional long-term loana 12 12 13- Other loans 1 1 1 1 4 31

Total Amortization 111 163 171 187 243 875 321

Total Debt Service 101 174 235 414 493 524 556 617 2,604 679

Deposit with Crown Agents 172Increase in working capital other than

cash and deposits (3h8) 273 105 9 27 16 8 8 68 5

TOTAL APPLICATICI 2,Sh9 2,331 1,125 1,01,7 1.867 1,5og 1,506 902 6,831 934

Cash eurplus/deficit 132 264 396 231Cumulative cash surplus 132 396 627

Debt service coverage 1.59 2.05 1.30 1.58 176 1.86 1.82 1.72

V/ Proceeds of IBRD Loan 338-SW

StiAZILAND ELECTRICITY BOARD

Financial Position Excluding Part B of the Project(expressed in thousands of Rands)

Year ending March 31 1968 1969 1970 1971 1972

Effect on Income and Return on Assets

Sales to Usutu Pulp Co. in millions of kwh 12.0 16.0 20.0 20.0Average price per kwh in R. cents 1.20 1.10 1.00 1.00

Revenue from Usutu Pulp Co. 144 176 200 200

Operating expenses of supplying aboveOperating, administration and naintenance 10 10 10 10Fuel 18 24 30 30Depreciation 10 10 10 10

Total 38 44 50 50

Net operating income from Usutu Pulp Co. 106 132 150 150Net operating income per Annex 7 679 753 807 838Net operating income without Usutu Pulp Co. 573 621 657 666

Return on average net fixed assets in operationexcluding Part B of the Project estimated to cost 9.8% 9.4% 9.4% 9.9%R.240,000

Effect on Cash

Cash earnings from Usutu Pulp Co. (as above) 116 142 160 160Less: expenditure on Part B financed out of

earnings 61additional debt service on loan for Part B 5 11 11 14 18

Net addition to cash from Usutu Pulp Co. (66) 105 131 146 142Net addition to cash from Usutu Pulp Co. (cumulative) (66) 39 170 316 458

Cash surplus (overdraft) per Annex 8 (57) (60) 132 396 627Cash surplus (overdraft) excluding Part B 9 (99) (38) 80 169

Debt service coverage excluding Part B 1.57 1.63 1.59 1.51

Debt/equity ratio excluding Part B 93/7 90/10 87/13 83/17 78/22

March 15, 1967

0

SWAZILAND , - t - ., d.

ELECTRICITY BOARD TRNSIS1 LIE66 k, .cisti.gPOWER DEVELOPMENT PROJECT ,i / __ + 1 kO. eINES

1966/67- 1970/ 71 66 kv propod

I rffw,§~~~~~~~~~~~~~ 1~ 1 k,. p-Op-Sd

*~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~tn irrigati Xonochesesf

'4-t~~~~~~~~~~~~~~~~~~~~~~~~~~~~F-, d.I-'-'..

dAs suitable ror 1-lgati-v

all,~~~~~~~~~~~~~~~~~~~~~~~~~~~i

° ? tO . E 25 20 Z ? -_X\3 OIIA

MARCH 1961 IBRD-IlytlM