Document of

The World Bank

Report No. 13108-TH

STAFF APPRAISAL REPORT

THAILAND

LAM TAKHONG PUMP STORAGE PROJECT

APRIL 5, 1995

Infrastructure OperationsCountry Department IEast Asia and Pacific Region

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Currency Equivalents(As of December 1994)

Currency Unit = Thai Baht (B)US$1 = B 25.0

BI = US$0.04

Government and EGAT Fiscal YearOctober I to September 30

Weights and Measuresbpd - barrels per dayha - hectarekV - kilovolt (1,000 volts)MVA - megavolt-ampere (1,000 kilovolt-amperes)kW - kilowatt (1,000 watts)km - kilometerMW - megawatt (1,000 kilowatts)kWh - kilowatt-hour (1,000 watt-hours)Gwh - gigawatt-hour (I million kilowatt-hours)MCM - million cubic metersMMt - million metric tonnestcf - trillion cubic feettpa - tons per annumtoe - ton of oil equivalentMMtoe - million tons of oil equivalent

Abbreviations and AcronymsDEDP - Department of Energy Development and PromotionDEQP - Department of Environmental Quality PromotionDPC - Department of Pollution ControlECCT - Energy Conservation Center of ThailandEGAT - Electricity Generating Authority of ThailandEGCO - Electricity Generating CompanyEIA - Environmental Impact AssessmentEMDP - Environmental Mitigation and Development PlanERR - Economic Rate of ReturnFPO - Fiscal Policy OfficeGSE - Good State EnterpriseIPPs - Independent Power ProducersMEA - Metropolitan Electricity AuthorityMOF - Ministry of FinanceMOSTE - Ministry of Science, Technology and the EnvironmentNEA - National Energy AdministrationNEB - National Environmental BoardNEPC - National Energy Policy CouncilNEPO - National Energy Policy OfficeNESDB - National Economic and Social Development BoardNGOs - Non-Governmental OrganizationsOEPP - Office of Environmental Policy and PlanningPEA - Provincial Electricity AuthorityPDP - Power Development PlanPTT - Petroleum Authority of ThailandROR - Rate of Return on Fixed AssetsVAT - Value Added Tax

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Thailand

Lam Takhong Pump Storage Project

Loan and Project Summary

Borrower : Electricity Generating Authority of Thailand (EGAT).

Guarantor : Kingdom of Thailand.

Implementing Agency EGAT.

Beneficiary : Not applicable.

Poverty : Not applicable.

Amount : US$100 million equivalent.

Terms : Repayable over 17 years, including five years of grace, at thestandard variable interest rate.

Commitment Fee : 0.75% on undisbursed loan balance, beginning 60 days aftersigning, less any waiver.

Onlending Terms : Not applicable.

Financing Plan The financing plan for the project is shown in para. 4.22.

Net Present Value US$86 million equivalent, at 10% discount rate (equalizingdiscount rate compared to the next best alternative - 16%).

Map : IBRD No. 26284.

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Thailand

Lam Takhong Pump Storage Project

Staff Appraisal Report

Table of ContentsPage No.

Loan and Project Summary ............................................

I. The Ener2e SectorA. Overview ................................................. 1B. Resource Endowment ......................................... 1C. Energy Consumption .3D. Organization and Planning ...................................... 3E. Environment ............................................... 4F. Energy Pricing ............................................. 5G. Energy Conservation ......................................... 6H. Privatization in the Power Sector .................................. 7I. Energy Sector Issues and Strategy ................................. 9

11. The Power SubsectorA. The Power Market ...................................... 1B. Generation and Transmission Facilities .1............................. 1C. Power Development Plan ..................................... 12D. Past Bank Experience and Sector Strategy . ....................... 14

III. The BorrowerA. Organization and Management ................................. 17B. Staffing and Training ........................................ 19C. Operational Performance .................................. 20D. Financial Management .................................. 21

IV. The ProjectA. Objectives and Description .............................. ... 24B. Implementation ................................. 29C. Cost Estimates ................................. 31D. Financing Plan ................................. 32E. Procurement .................................. 32F. Disbursements .................................. 34

V. Enviromnental AsDectsA. Environmental Impact Evaluation and Approval ....... ................. 35B. Environmental Impact and Impact Mitigation ......... ................. 35C. Rehabilitation ........................................ 38D. Transmission Lines ....................................... 41

This report is based on the findings of a preappraisal mission to Thailand in July 1994, comprising Darayes Mehta(Principal Power Engineer), Rebecca Sekse (Financial Analyst), Barry Trembath (Senior Power Engineer) andManinder Gill (Resettlement Specialist). Donald Graybill acted as the Environmental Expert for the project. Peerreviewers were Ramon Lopez-Rivera (Consultant, Hydropower), Jamil Sopher (Principal Financial Analyst) andOlivier Koenig (Senior Economist). The project was cleared by Mr. Callisto E. Madavo, Director, EAI and Mr.Vineet Nayyar, Chief, EAlIN.

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VI. Financial AnalysisA. Past Performance . .......................................... 43B. Present Financial Position . ..................................... 44C. Financial Outlook . ......................................... 46D. Lignite Mine Operations . ..................................... 48E. Tariff Levels and Structure . ..................................... 49F. Financing Plan ............................................ 50

VII. Project JustificationA. Economic Analysis . ......................................... 52B. Risks ............................................... 53

VIII. Agreements Reached and RecommendationA. Agreements .............................................. 55B. Recommendation ............................................ 56

Annexes1. Highlights of EGAT, MEA and PEA Operations ......................... 572. Demand-Side Management Program ................................. 583. Power Subsector Privatization Plan .......... ........................ 604. Demand Forecast ............................................. 625. EGAT's Existing Generating Capacity ................................ 636. EGAT's Existing Transmission and Substation Facilities ..................... 647. Power Development Plan . ....................................... 658. Balance of System Load Requirement and Capabilities ...................... 679. Projected Energy Balance......... I ....... 6810. Rationalization of Bulk Supply Tariff to MEA and PEA ..................... 6911. Project Cost Estimate . ......................................... 7112. Key Dates Schedule for Procurement and Construction ...................... 7313. Contract Packages ............................................ 7514. Disbursement Schedule .......................................... 7715. Environmental Plan and Budget . ................................... 7816. EGAT's Past Financial Performance ................................. 7917. EGAT's Projected Financial Performance .............................. 8218. EGAT Tariff Rates ............................................ 8819. EGAT's Investment Program . ..................................... 8920. Fuel Price for Optimization ........................................ 9021. Rate of Return on EGAT Power Development Plan ........................ 9222. Capital Cost .............................................. 9323. Project's Economic Rate of Return .......... ........................ 9424. Documents in Project File . ....................................... 95

Charts1. EGAT's Organization Chart . ..................................... 962. EGAT Organization for Design of Lam Takhong ......................... 973. EGAT Organization for Construction of Lam Takhong ...................... 984. Organization for Environmental Mitigation and Rehabilitation ................. 995. Implementation Schedule . ....................................... 100

MapIBRD No. 26284

Chapter I

The Energy Sector

A. Overview

1.1 The social and economic transformation in Thailand over the past 25 years has resulted inrapid growth in energy consumption. Most of this growth was initially met by energy imports: at thetime of the 1979/80 oil crisis, Thailand's dependence on imported oil was in excess of 90% of totalprimary commercial energy. In the ensuing years, however, efforts made by the Thai Government topromote the development of indigenous energy resources have had a visible impact on the pattern ofcommercial energy consumption.

1.2 In 1993, the total supply of commercial energy in Thailand of about 33 million tons of oilequivalent (toe) increased two and a half times over 1983 levels, and was growing at an average rate of11% per year. Of the total amount, 62% was supplied by petroleum, 21% by natural gas, 13% bylignite, 3% by hydro power and 1 % by coal. In addition, Thailand consumed about 10 million toe ofrenewable energy in 1991, mainly in the form of fuel wood which remained the predominant fuel inrural households. Despite the country's impressive economic growth (of 8% per year for the last sixyears), per capita commercial energy consumption has been fairly modest and comparable to that of alow-income developing country. The modest consumption pattern is due to the large rural populationand the relatively high price of commercial energy (compared with rural income levels), which placescommercial energy beyond the reach of the lower income group. The outlook is, therefore, for rapidgrowth in commercial energy consumption as the economy continues expanding.

B. Resource Endowment

1.3 Thailand has a diversified energy resource base, consisting of bio-mass, petroleum (oil andnatural gas), lignite, hydropower, and geothermal energy, the latter being still at an exploratory stage inthe northern region. However, Thailand's indigenous resources are limited in comparison to its needs,and the country's energy imports will increase over the years.

Oil and Gas

1.4 Given the geological features of the country's hydrocarbon basins, crude oil is notexpected to be a major contributor to Thailand's resource base. At the end of 1993, there were about245 million barrels of proven and probable oil reserves. Of these, about 177 million barrels arecondensate, which would have to be produced in association with offshore gas, and about 68 millionbarrels are crude oil. There are additional oil reserves of about 440 million barrels. Production iscurrently limited to Phet crude from the Sirikit oil field, producing about 22,000 barrels per day (bpd)in 1993. An additional 26,000 bpd of condensate was produced in association with gas from offshorefields in the Gulf of Thailand. To meet the oil demand, Thailand imported 163,000 bpd of finishedpetroleum products and 321,000 bpd of crude oil for processing in its three local refineries in 1993.

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1.5 The country's natural gas resources are limited and Thailand would not be able to producesufficient gas to meet the demand over the next 30 years. Natural gas has been discovered mostly bycompanies looking for oil. At the end of 1993, the remaining proven and probable reserves were about6.5 trillion cubic feet. Gas production in 1993 was 930 million cubic feet per day (mmcfd), of which880 mmcfd were produced from the offshore fields. Considering the country's limited supply, Thailandwould be looking towards importing piped gas from neighboring countries (potentially from Malaysia,Myanmar and, recently, Viet Nam), or importing from international markets in the form of LNG.Negotiations are well on their way for import of piped gas from Myannar.

Lignite

1.6 Thailand's coal resources are all relatively low grade, of the variety generally categorizedas lignite. Geological lignite reserves amount to a total of 2.1 billion tons, i.e., 3.7 billion barrels ofoil equivalent, 69% of which is in the Mae Moh basin in northern Thailand which has been developedby the Electricity Generating Authority of Thailand (EGAT). Economically minable reserves areestimated at 1,330 million tons (MMt), of which 1,152 MMt are located in Mae Moh. The output atMae Moh, is currently at a level of about 7 million tpa. Earlier plans to expand Mae Moh mining to alevel of 31 million tpa by 1998 (enough to support power generation of 4,700 MW), have had to beseverely curtailed due to geotechnical and environmental problems. While potential for additionallignite discoveries is good - recent nation-wide exploration by EGAT has resulted in a number ofdiscoveries, including that in 1987 of a major deposit at Saba Yoi in southern Thailand with potentialreserves in excess of 200 MMt - its commercial exploitation is in doubt due to political reasons. Withuncertainties surrounding the development of the country's lignite resources it would be necessary toimport coal and establish coal-fired generation by as early as 2000. Recently, prospects have emergedfor development of lignite-fired power in Laos, which could be exported to Thailand.

Hydropower

1.7 Thailand's hydropower potential, excluding that of its two main international rivers -- theMekong and the Salween -- is estimated at 11,700 MW. Of this, about 2,400 MW, with an annualgeneration capability of 4,500 GWh, have already been harnessed by EGAT. Increasing oppositionfrom the public and non-governmental organizations (NGOs) to the construction of dams would makedevelopment of hydropower extremely difficult, and Thailand cannot look forward to any significantdevelopment of this renewable energy resource. On the other hand, development of pump storageprojects which does not involve damming of rivers and entails minimum ecological and social impactswould be pursued whenever it is economically viable compared to the next best option of peakinginternal combustion turbines.

1.8 The hydropower potential of rivers within Thailand is dwarfed by that of rivers formingthe Thai frontier with Laos and Burma. The development of possible sites on the main rivers wouldrequire agreement between the riparian powers, including in particular acceptable terms for Thailand touse a major part of the energy generated since the other countries are unlikely to be in a position toabsorb the energy provided by such projects. Negotiations have recently been completed for import ofhydropower from Laos which would be produced jointly by international private organizations and theLao Government.

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Bio-mass

1.9 The process of modernization occurring in rural Thailand notwithstanding, use oftraditional fuels has remained predominant in rural areas. About two-thirds of the reliance on bio-massconsists of charcoal and firewood use by rural households (at the rate of about 10 MMtoe/year), andconsequently forests near inhabited areas have been heavily over-cut. The remaining third of bio-masssupply consists of bagasse and paddy husks used as fuel in the sugar and rice industries. Thailandsuffers from an increasing scarcity of wood fuels and other wood products, particularly in the northeast.In 1993, the Government launched a nationwide reforestation campaign that would involve the publicand the private sectors and the rural population.

C. Energy Consumption

1.10 Consumption of final commercial energy in the economy in 1993 is accounted for by thefollowing sectors: (a) transport for 39%; (b) industrial for 31 %; (c) residential and commercial (R&C)for 24%; and (d) other for 6%. Energy consumption during 1986-93 grew at an annual average of8.8% with transport growing at an annual average of about 11.8%, followed by industry at 11.4%,agriculture at 5.4%, and the R&C sectors at 2.9%. The high consumption of the transport sector isbasically due to inadequate mass transport systems and severe traffic congestion in the metropolis.Within the industrial sector, the manufacturing subsector, particularly food and beverage, accounted forthe bulk of energy consumption growth. Residential energy use represents about 77 % of the total R&Csector of which 90% is consumed by the urban population. Although the rate of rural electrification ishigh, woodfuel (mostly wood and charcoal) continues to be the main cooking fuel in the countryside.

1.11 The power sector in Thailand has grown at a rapid pace over the past two decades.Considerable progress has been made in making electricity widely available, especially in provincialurban areas. Industrial consumption has also been growing rapidly. Overall, growth in power demandhas consistently exceeded that of commercial energy consumption. This has resulted in a per capitaelectricity consumption in Thailand (about 970 kWh in 1993) higher than the average for countries at anincome level similar to Thailand. Similar trends are expected to prevail in the future as the country'sindustrial and socio-economic development accelerates.

D. Organization and Planning

1.12 The energy sector in Thailand is operated by a number of well-managed and mature publicinstitutions. Their inter- and intra-sectoral arrangements are quite sophisticated and the policyframework is extensive. There are numerous energy-related agencies, spreading across many ministriesand include several cabinet level committees. The relationships between Government energy agenciesand state energy enterprises are increasingly similar to those of other advanced East Asian countries; theagencies formulate energy policies in line with the enterprises' commercial objectives, yet these areconsistent with the country's needs.

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1.13 The Petroleum Authority of Thailand (PTT) -- the dominant entity in the petroleum sector-- is involved in downstream oil and gas activities; upstream activities are carried out by the privatesector. PTT is responsible, inter alia, for the purchase, transport, processing and sale of natural gas.However, PTT competes with international oil companies and has a third of the market share in thedistribution and marketing of oil. The power sector is organized around three state enterprises: EGATis responsible for generating and transmitting electricity and producing and utilizing lignite, while theMetropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA) areresponsible for power distribution in the Bangkok metropolitan area and the rest of the country,respectively. Highlights of the operations of EGAT, MEA and PEA are included in Annex 1.

1.14 Energy policy and planning is vested in key governmental organizations. At the highestlevel is the National Energy Policy Council (NEPC) which is chaired by the Prime Minister. Itsmembers include the deputy prime minister, ministers whose portfolio involve energy, andrepresentatives from the National Economic and Social Development Board (NESDB), the secretarygeneral of the National Energy Policy Office (NEPO), the director general of the Energy DevelopmentPromotion Department (EDPD), and the director of the Budget Bureau. The NEPO, which is thesecretariat to NEPC and acts as its operating arm, functions primarily as a link between NEPC and thecountry's state energy enterprises and conducts all energy policy work. The NESDB is a centralplanning agency that assesses the country's economy and prepares the five-year plans. The variousdepartments involved in energy affairs are: (a) the Department of Mineral Resources, responsible forassessing and preliminary exploration of the country's coal and petroleum reserves; (b) the Departmentof Energy Development and Promotion, which was recently established to assume responsibilities of thenow-defunct National Energy Administration, responsible for conducting research and development andmonitoring energy sector activities; and (c) the Department of Industrial Works, responsible forcontrolling industrial air and water pollution.

1.15 State enterprises engaged in the energy sector enjoy a large degree of autonomy in theconduct of day-to-day operations; however, they are subject to strict government control in all mattersrelated to investment planning and financing. Because of strict procedures for controlling public debt,all loans made by public enterprises requiring government guarantee must be approved by the NationalDebt Policy Committee and by the Cabinet, and subsequently endorsed by the Fiscal Policy Office(FPO) of the Ministry of Finance. Moreover, in 1985 a National State Enterprise Committee wasappointed under the Prime Minister to monitor compliance by public enterprises with governmentguidelines in the area of pricing. While many of these state energy enterprises still lack financialdiscipline and autonomy or suffer from labor redundancy and cumbersome personnel policies, this isnot the case with PTT and EGAT. Both these enterprises are in the process of undergoing a majorrestructuring of their organization through corporatization, with a view to a partial or full privatization.

E. Environment

1.16 In 1992, the Government revised its National Environmental Act, reorganizing the Officeof the National Environment Board (NEB), and establishing NEB as a cabinet-level committee chairedby the Prime Minister. The Act established three department-level organizations that report directly tothe Permanent Secretary of the Ministry of Science, Technology and the Environment (MOSTE).These are the Office of Environmental Policy and Planning (OEPP), the Department of Pollution

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Control (DPC) and the Department of Environmental Quality Promotion (DEQP). The Actstrengthened public's right to be informed and to participate in environmental matters and established anNGO coordination unit to facilitate this. The Act also established an Environmental and Quality of LifeDevelopment Fund (funded by surcharges on natural gas and petroleum products) to financeenvironment protection programs of private industry, local authorities, NGOs and communities. AboutBaht 550 million were used from this fund in 1993-94 for pollution control activities in Pattaya, Phuketand Hadyai.

1.17 The OEPP is currently engaged in preparing a National Environmental Action Plan withthe guidance of a subcommittee established under the NEB. In the interim period, it has prepared aProvincial Action Plan that identifies policies and measures for protecting the country's naturalresources and the environment. In regard to the energy sector, this plan: (a) lays out plans to controlpollution from vehicles and industry; (b) identifies areas of serious environmental concern andestablishes preventive and emergency measures to deal with their atmospheric pollution; (c) establishescriteria and regulations to control pollution from burning lignite in industries; and (d) lays downmethods for monitoring ambient and emission levels and preparing an inventory of pollution sources.Based on these plans, investments are being made in: (a) improving fuel quality to reduce emissions; (b)building monitoring systems in the industrial estates; and (c) strengthening the monitoring capacity foratmospheric pollution from Government entities such as EGAT.

1.18 The process for the approval of the Environmental Impact Assessments (EIAs) of projectsof public sector organizations, such as EGAT, was strengthened. Particularly significant is theappointment of an external "expert committee" (having representatives of affected ministries, academics,and one member of the public, usually represented by an NGO), to review EIAs.

F. Energy Pricing

1.19 The current prices of all energy products in Thailand reflect their actual economic costsexcept for lignite. In August 1991, the Government deregulated the price of all petroleum productsexcept liquified petroleum gas (LPG). In addition, the Oil Stabilization Fund, which was established bythe Government in 1974 as a mechanism to dampen the effect of large short-run movements ininternational oil prices on retail product prices, was phased out.

1.20 Currently, the ex-refinery prices of oil are tied to the world market through periodic priceadjustments based on the Singapore spot-market price. Except for a small surcharge levied on importedoil products to protect domestic refiners, the domestically-refined petroleum price structure fully reflectsthe cost of supply based on the international market. In 1993, the Government allowed EGAT topurchase 20% of its oil on the open market, on a trial basis. PTT was successful in the tender processand currently has long-term contracts with EGAT to supply virtually all of the heavy oil for five ofEGAT's power plants at market-based prices.

1.21 The unique features of the domestic gas industry in Thailand have led to the developmentof a relatively sophisticated pricing structure in which the country has a separate pricing system for gasproducers and consumers. The principle the Government applies when setting consumer prices is tolink gas prices to alternative fuel prices in each activity. The present price of gas to industry, which

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consumes less than 6% of the total, is intended to encourage LPG consumers to shift to gas; but, nosuch incentive is provided to fuel oil users, because gas has a lower netback value when substituted forfuel oil. The price to industry is significantly higher than the one established for the power sector,since the margin of substitution between LPG and gas has been high, even after a discount to allow forpenetration of gas into the LPG market. The price to the power sector, where over 90% of total gas isused, is based on the price paid by PTT to upstream producers, the average cost of gas transmission,and the VAT.

1.22 Lignite is not traded internationally due to its low heat content and high transport costs.Its price in the industrial sector is determined by market forces, and in the power sub-sector, whereEGAT plays the role of supplier and consumer, the price is reflected in a "transfer price" used for'planning purposes to analyze expansion investment decisions.

G. Energy Conservation

1.23 Concerned with the rapid growth in energy consumption and its impact on the economyand the environment, the Government is fostering energy conservation in all sectors of the economy. In1992, the Government approved legislation establishing the Energy Conservation Promotion Act, whichincreased the commitment and resources necessary to implement a comprehensive energy efficiencyprogram. The Act: (a) formalized the responsibilities of the Department of Energy Development andPromotion (DEDP) as the lead implementation agency for energy conservation; (b) gave DEDP theauthority to issue voluntary building energy codes and appliance efficiency standards; (c) identified aclass of large energy users as "controlled facilities" and required that they hire energy managers,conduct energy studies and develop energy conservation plans, or face large financial penalties; and (d)established the Energy Conservation Promotion Fund (ECF), financed through taxes on refineryproducts. The ECF will fund energy conservation, renewable energy and cogeneration projects as wellas support training, technical assistance, promotion, monitoring and evaluation, research anddemonstration, technology transfer, and related activities that improve environmental conditions.

1.24 The Government has established an Industrial Process Efficiency Program to be managedby DEDP and implemented by the Energy Conservation Center of Thailand (ECCT), with a budget ofUS$30 million and a savings potential of 30 MW and 220 GWh (per annum) by 1997.

1.25 To foster electricity conservation through appropriate pricing policies, the Government hasrestructured and increased electricity tariffs in 1991 so that the average tariffs for all consumer classes,except residential, are practically equal to long-run marginal cost. Demand charges are levied for allmedium and large general service consumers, while time-of-use (TOU) tariffs are mandatory for largegeneral service consumers and optional for those that are small. The introduction of TOU tariffs hashad limited success because it has been hampered by the lack of an adequate tariff structure todistribution companies, which do not pay demand charges to EGAT.

Demand Side Management

1.26 In 1992, a Demand Side Management (DSM) master plan was approved by NEPC, havingan initial five-year program with a budget of US$189 million and a modest savings target of

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approximately 238 MW, 1,427 GWh per year. Potentially, DSM could reduce peak demand by 2,000MW over the next decade, which is a reduction of about 8% of the system needs. The program'sobjectives would be achieved by: (a) providing user and manufacturer incentives and consumereducation to influence practices and attitudes towards energy-efficient technologies; (b) developingefficiency standards and testing capabilities to exercise control and monitor efficiency improvements; (c)developing and promulgating building and appliance codes so as to enforce minimum efficiencystandards; and (d) pursuing technological improvements and their adaptation to Thai conditions. Theprogram's potential benefits are estimated at about US$260 million in capital investment and US$30million per year in fuel expenses. EGAT has been charged with the primary responsibility forimplementing the DSM program (see Annex 2 for details).

H. Privatization in the Power Sector

1.27 Over the last decade, the Government has looked to privatization as a means of reducingpublic sector borrowing and increasing enterprise efficiency. It has reduced the number of stateenterprises from about 100 to 63, and has made a concerted effort to involve the private sector in stateenterprises through the partial sale of shares, private participation in the enterprises, contracting out ofservices, and joint ventures. The Bank's operational involvement in the Thai power sector hasfacilitated continuing inputs to its privatization process. Under Bank advice, and as a first step towardscommercialization, an organizational efficiency study of EGAT was conducted by consultants. EGATorganization is currently being restructured in line with the study's recommendations. In September1992, the Government approved a plan for deregulation, restructuring, and privatization of the powersubsector. At the center of the structure would be a corporatized EGAT which, while continuing to bea major power producer, would purchase electricity from independent power producers (IPPs) andneighboring countries, and transmit and sell it to the Metropolitan Electricity Authority (MEA), theProvincial Power Authority (PEA) and major industrial users. The regulator of the subsector would bethe National Energy Policy Office (NEPO).

1.28 The conceptual framework of the government policy and the steps of its privatizationmaster plan for the subsector are as follows:

Step 1: (a) Deregulate EGAT subject to its meeting the following criteria for "Good StateEnterprise": (i) ability to remit 30% of its net profit to the Government; (ii) laborcost not to exceed 20% of total assets; (iii) no less than 6% rate of return on totalrevalued assets; (iv) improvement in productivity by at least 2% per annum; (b)Place the buying and selling of electricity among EGAT, MEA and PEA, and fuelpurchasing on a commercial contractual basis; (c) Sell 51% of the stock of theElectricity Generating Company (EGCO) (see para. 1.36); and (d) Eliminate theuniform tariff policy.

Step 2: (a) Encourage private sector participation, including IPPs and EGCO, in powergeneration investment following the steps specified in the Private SectorParticipation in State-Owned Activities Act of 1992; (b) Identify the proportion andprojects available for private sector investment; (c) Commercialize EGAT'soperations by its decentralization and restructuring into business units; (d) Prepare

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for the deregulation of MEA and PEA; (e) Restructure PEA on a regional basis;and (f) Implement electricity tariff based on marginal cost for each region.

Step 3: (a) Corporatize EGAT, MEA and PEA by amending their related acts; (b) RegisterEGAT as a public company on the Stock Exchange of Thailand (SET); and (c)Invite IPPs to actually participate in power generation investment.

Step 4: (a) Sell EGAT shares on the SET with the Government retaining majority holding;and (b) Separate PEA into regional companies in preparation for its privatization.

1.29 The plan is expected to be completed by 1997/98. The progress of the privatizationexercise and timetable is presented in Annex 3. EGCO was listed on the stock exchange in January1995. EGAT is expected to achieve "Good State Enterprise" status by June 1995. It has alreadysigned contracts with 20 small IPPs for an aggregate capacity of 210 MW, finalized comprehensivedocuments for contracting 3,800 MW of capacity over 1995-2003 and expects to receive IPP proposalsfor the first 1,000 MW by June 1995. It is expected that the proposed framework would attract IPPs,as evidenced by the interest shown by dozens of IPPs at a recent seminar conducted by EGAT and theGovernment. The Government has already undertaken on a road show for soliciting private powerfinance.

1.30 The privatization framework and implementation steps that the Government has proposedfor the power sector are well planned and well tailored to the circumstances in Thailand. Privatizationis now on a steady path and its pace is being accelerated. The Government has deftly resolved seriousopposition from the unions to corporatization of the power sector entities. The Government has shownkeen interest in associating the Bank in its privatization efforts across the board by: (a) requesting theBank to undertake a comprehensive review of privatization of its state enterprises (Bank's Report No.1312-TH, "Increasing Private Participation and Improving Efficiency in State Enterprises"); and (b)conducting seminars to discuss privatization issues between highest levels in the Bank and theGovernment, including the Prime Minister. In regard to the power sector, the Bank has recommendedseveral measures to enhance competition, notably: in the near term: (a) EGCO to be fully divested andits management made independent of EGAT; and (b) accelerate the pace of introducing IPPs; in thelonger term: (a) divest EGAT into a number of generation companies, with EGAT becoming atransmission and power pool company; and (b) distribution companies and large industrial consumers tobe allowed to purchase directly from any power producer. The Government is receptive to the Bank'ssuggestions and would solicit Bank's assistance in working out details as the privatization programproceeds.

Promotion of Small Power Producers

1.31 The first step taken by the Government towards increasing private sector participation wasallowing cogenerators and small power producers to sell power to EGAT. Cogenerators are powerplants that produce both steam and electricity and are often part of industrial estates. Small powerproducers are plants that sell less than 60 MW to EGAT. At present, there are 20 small powerproducers with a total installed capacity of 669 MW mostly utilizing traditional fuels such as bagasse,rice husk, wood, etc. EGAT has signed nine contracts totalling about 200 MW with these producersand five have actually sold their output to EGAT in 1994.

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Independent Power Producers (IPPs)

1.32 The Government has taken necessary steps to encourage IPPs to invest, own and operatelarge-scale power plants, as well as sell their output to EGAT. The IPPs are expected to bid forEGAT's new capacity requirement or new power projects in EGAT's PDP.

1.33 An open invitation to bid to produce power is underway following the recent approval byNEPC in May 1994 for the purchase of electricity from IPPs by EGAT in stages as follows: (a) 1,000MW for 1996-2000; (b) 2,800 MW for 2001-2002; and (c) 1,700 MW in each year from 2003 to 2006.A public seminar was organized in August 1994 to solicit comments from prospective bidders; severalhave already expressed their intentions to compete for IPP licenses. Bid invitations are expected to beannounced by June 1995. For projects to be commissioned in the initial stage (1996-2000), the IPPbids need to be submitted before the end of March 1995. Invitation for specific projects, meanwhile,will also be issued.

1.34 IPP projects are expected to have a capacity of 100 MW or more. The projects will bepromoted by the Board of Investments and given various incentives such as tax breaks of up to eightyears and exemption from the machinery import tax. The Government is expected to impose minimumconditions on private investment in the power subsector and will evaluate IPPs on the various criteriathat include, among others, the type of energy that will be used to generate electricity.

Electricity Generating Company (EGCO)

1.35 One of the early initiatives undertaken by the Government in line with the privatizationmaster plan was the establishment of EGCO, a wholly-owned subsidiary of EGAT, which listed 51 % ofits share in the SET. The reduction of EGAT's shareholding in EGCO to 49% by offering shares tothe general public in both domestic and international equity markets was the first major privatization ofan electricity generating business in Thailand.

1.36 In March 1992, the National Assembly passed an amendment to the EGAT Act allowingEGAT to establish EGCO, and consultants were hired to assist EGCO in optimizing its capitalstructure, determining the logistics of privatization, pricing and timing of both equity and debt issues,drafting of EGCO's primary contracts, and the organization and staffing plan. The consultant's report,finalized in December 1992, proposed the sale of the Rayong combined cycle power plant by EGAT.A second stage of the consultancy worked on the actual underwriting of both stock and bonds of EGCO(see Annex 3 for more information on EGCO).

I. Energy Sector Issues and Strategy

1.37 The issues facing the energy sector and the Government's strategy in meeting thechallenges posed are summarized hereunder:

(a) A huge program of investments in the power subsector over the next six years - US$14billion by EGAT, US$4.0 billion by PEA and US$2.0 billion by MEA - would greatly

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increase public sector debt. In response, the Government is taking necessary measures toinvolve the private sector in funding power projects (paras. 1.27 to 1.33).

(b) Thailand's domestic resources for power generation are limited. Natural gas is fullycommitted, lignite poses technical and environmental problems, while hydropowerdevelopment invites strong protests from dam opponents. Thailand would thus need torely heavily on imported energy for power generation, and for this it has several options,including piped natural gas from Malaysia and Myanmar, liquified natural gas (LNG)from the international market, coal from the Pacific rim countries and hydro power fromLaos. The Bank's 1993 Fuel Option Study (Report No 11948-TH) analyzes theseprospects in depth, and in the coming years the Bank expects to assist the Government infirming up its fuel choices.

(c) While pursuing a large power development program, the Government needs to pay seriousattention to improving the efficiency of energy consumption in general and electricityconsumption in particular. Its: (a) 1992 Energy Conservation Promotion Act and theassociated Energy Conservation Fund (para. 1.23); and (b) the DSM Master Plan (para.1.26) provide a strong thrust in this direction.

(d) In recent years, the Government has placed a strong emphasis on environmentally soundand sustainable development as evidenced from its Environmental Quality Act of 1992(para. 1. 16). Gaining from its experience under the Bank's Third Power SystemDevelopment Project (Loan 3423-TH), the Government has increasingly emphasizedinvolvement of affected people and selected NGOs in environmentally sensitive projectsand formalized this in the evaluation of EIAs. In regard to atmospheric emissions frompower plants, the Government has decided to fit (and retrofit as appropriate) flue gasdesulfirizers on lignite-fired thermal power units and use low sulfur oil (costing 20%more) in oil fired thermal power units. It has also introduced stringent short-term SO2ambient standards to safeguard the health of the people, especially in the vicinity of theMae Moh mining-power complex.

Chapter II

The Power Subsector

A. The Power Market

2.1 The electricity market has grown at a very rapid pace over the past two decades. Totalsales of electricity and per capita consumption increased from 17,563 GWh and 355 kWh, respectively,in 1983 to about 56,558 GWh and 979 kWh in 1993, averaging a growth rate of 12.4% p.a. (comparedto an average GDP growth rate of 8.6%). Over the years, the industrial sector has become the majorelectricity consumer, accounting for 46% of electricity sales in FY93. This is followed by thecommercial sector (32%) and the residential sector (21%). EGAT's daily load curves which haveshown a pronounced evening peak until about 1990, have started demonstrating an increasing day timepeak from 1992 to 1993, showing that considerable changes are taking place in the structure ofelectricity use in Thailand. The DSM program (paras. 1.25 and 1.26) will address the issuesconcerning the magnitude and shape of EGAT's load curve.

2.2 A sharp upsurge in economic activity in the late 1980s (GDP growth was 13.3% in FY88,12.2% in FY89 and 11.6% in FY90) translated into very high growths in electricity demand (15% inFY88, 14.5% in FY89 and 13.8% in FY90). The demand growth rates slowed to 13.4% in FY91,10.3% in FY92 and 9.6% in FY93. The latest load forecast (detailed in Annex 4 and summarized inTable 2.1), as developed by the National Load Forecast Working Group (composed inter alia ofNESDB, EGAT, MEA, PEA and NEA) envisages a 9.5% growth rate in electricity generation over the1993-98 period. This growth rate is commensurate with the forecast rate of economic development andis considered to be reasonable. The growth rates are moderated to below 7.0% p.a. over 1998-2003.These projections have been endorsed by the Government as providing a suitable basis for planningpurposes.

Table 2.1: LOAD FORECAST 1993-2003

FY88 JY93 FY98 FY03Peak Generation (MW) 5,444 | 9,730 15,315 21,440

Net Energy Generation (GWh) 31,997 62,180 98,763 141,862

Annual Load Factor (%) 67.1 T 73.0 74.0 74.5

Growth Rates (average % p.a.) l

Peak Generation 15 9.6 | 7.9 1 5.9

Net Energy Generation 13.5 11.0 l 8.3 6.5

B. Generation and Transmission Facilities

2.3 As of September 1993, EGAT's installed capacity was approximately 12,178.3 MW withanother 2,018 MW under construction. Generating facilities (Annex 5) consist of conventional thermalplants (50%), hydropower (20%), combined-cycle plants (28%) and combustion turbines (2%). Over

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the years, EGAT has converted most of its oil-based thermal capacity (6,102 MW) to dual oil/gas firingto take advantage of the increasing availability of natural gas while maintaining the option to switchover to oil. Other thermal plants include lignite-fired units (2,059 MW) and the remaining oil-firedunits (4,043 MW).

2.4 EGAT's transmission facilities are tabulated in Annex 6. In addition to the construction oftransmission lines and substations required to evacuate the output of new generation plants, EGAT isprogressively developing a transmission system to serve various areas of the country. At present,EGAT operates 20,005 circuit-kilometers (ckm) of transmission lines, including 1,201 ckm constructedfor 500 kV.

C. Power Development Plan

2.5 EGAT has fully computerized the formulation of its power development plan (PDP) usingthe WIGPLAN model. It regularly updates the PDP in response to changes in demand growth, fuelavailability and price, and earliest possible commissioning dates of candidate generating plants. Itslatest power development plan (presented in Annexes 7, 8 and 9) does not take into account availabilityof piped gas from Malaysia or Myanmar, import of gas in the form of LNG or import of hydro powerfrom Laos. Although these prospective sources are under Government's active consideration, no firmdecisions have yet been taken. EGAT would consider these sources in its development plan as soon asfirm contract arrangements for supply have been negotiated. Of note in this PDP, as compared toprevious PDPs, are: (a) the introduction of a 300 MW fluidized bed combustion unit for the first timein EGAT's system; (b) the use of low (0.5%) sulfur oil (at about 20% higher cost) in oil-fired units; (c)deferment of expansion at Lampang (Mae Moh) to 2001 and use of wet flue gas desulfurizers on alllignite-fired units; (e) absence of development of lignite-fired units at Saba Yoi due to political reasons;(e) deferment of imported coal fired units for environmental reasons and specification of dual fuel(oil/coal) for these plants; (f) strengthening of the interconnection between the Thai and Malaysian gridsto 300 MW using HVDC (this link would be upgraded later); and (g) very modest hydropower (447MW) development due to environmental considerations. Table 2.2 summarizes the aggregate capacityadditions up to the year 2003. This indicates: (a) a substantial addition of gas-fired combined-cyclecapacity up to 1998 when current gas reserves would be fully committed; (b) a substantial lignite-baseddevelopment most of which would be towards the latter part of the century; (c) a fairly large importedcoal/oil-fired capacity; (d) a mix of pump storage and internal combustion turbine peaking capacity; (e)a modest development of hydro power; and (f) no addition of oil/gas-fired or fuel oil-fired capacity.

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Table 2.2: POWER GENERATION DEVELOPMENT PLAN (1994-2003)(capacity additions in MW)

Type of Facility FY94-98 FY99-03 Total

Conventional Steam Plants

Natural Gas/Oil 0 0 0

Lignite 600 2,100 2,700

Coal/Oil (imported) 0 5,100 5,100

Fuel Oil 0 0 0

Combined Cycle 3,302 600 3,902

Pump Storage 175 1,300 1,475

Combustion Turbine 600 0 600

Hydro 261 186 447

TOTAL [ 4,938 9,286 | 14,224

2.6 The shares of various types of fuel in electricity generation are expected to move asfollows (Annex 9): (a) hydropower -- declining from the 1994 level of 5.3% to 4.7% by 2003; (b)natural gas -- increasing to a peak level of 45.9% by 1994 and then declining to 42.4% by 2003; (c)fuel oil -- remaining at a level of about 29.5% until 1998 and thereafter declining to about 5.6% by2003; (d) lignite -- increasing from the current level of 19. 1 % to 22.0% by 2003; and (e) imported coal-- starting from 2000 and reaching a level of 24.6% by 2003. The fuel mix would change significantlytowards the latter part of the century if import of piped natural gas from Myanmar and Malaysia and/orhydropower from Laos and Myanmar are taken into consideration. These potential developments arecurrently not taken into account in EGAT's planning process, but would soon be in the future, subjectto firming up of import opportunities for natural gas and hydropower. Likewise, savings due to DSMwould be integrated in the planning process, as such savings become significant over the years.

2.7 EGAT's transmission program is aimed at extending high voltage 230 kV and 115 kVtransmission facilities to all provinces of Thailand by the mid-1990s. The extra high voltage 500 kVtransmission system, which is superimposed on the 230 kV system, is required for bulk powertransmission to accommodate the large-scale development of lignite-fired power plants at Mae Moh.EGAT's transmission development plan, shown in Table 2.3, is reasonable.

2.8 Overall, EGAT's PDP is appropriate to the present circumstances. Project supervisionwould provide the Bank with an opportunity to review regular updates of EGAT's PDP to monitor theimpact of changes in power demand and fuel supply scenarios on the composition and magnitude ofpower investments. Agreement was reached at negotiations that EGAT will carry out an annual reviewand update of its 5-year investment program and related financing plan and exchange views with theBank and the Government on the said program.

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Table 2.3: EGAT's TRANSMISSION DEVELOPMENT PLAN(1993-2003)

FY93-97 FY98-02 TOTAL

Transmission Lines (in ckm)

500 kv 455 4,162 4,617

230 kv 2,567 1,474 5,041

115 kv 2,854 219 3,073

TOTAL 6,876 | 5,855 | 12,731l

D. Past Bank Experience and Sector Strategy

Experience with Past Loans

2.9 The Bank has made 22 loans to Thailand for power, of which 17 have been made toEGAT and its predecessor for financing the expansion of electricity generation and transmissionfacilities, four to PEA for rural electrification, and one to MEA for distribution expansion. Of the 17loans to EGAT, 13 have been fully disbursed; the other two are progressing on schedule. Three loansto PEA have been fully disbursed and one is progressing satisfactorily. The loan to MEA is alsoprogressing satisfactorily.

2.10 In the last several years, EGAT completed five Bank-financed projects for powergeneration: Bang Pakong Thermal (Loan 1690-TH) and Khao Laem Hydro (Loan 1770-TH) in 1985,Pattani Hydro (Loan 1485-TH) in 1983, Power Subsector (Loan 2000-TH) in 1987, and Power SystemDevelopment (Loan 3027-TH) in 1992. The corresponding project completion reports and projectperformance audit reports highlight EGAT's financial recovery following the oil price increases of theearly 1980s from a -2% rate of return on revalued assets in FY79 to 7.5% in FY91, the maturity of theBank's operational and policy dialogue with the power sector, and EGAT's proven projectimplementation and financial track record. These projects were completed on schedule and within theappraisal cost estimates with three minor exceptions: (a) the Khao Laem Hydro project was 12 monthsbehind schedule and had a 4% cost overrun because of unexpected complications in civil works; (b) thePower Subsector project, was completed 15 months late and 51% under the appraisal project costestimate because inflation assumptions used to project contingencies were higher than actual increases,and because one component of the project was canceled; and (c) the Power System Developmentproject, was completed 12 months late due to adverse weather conditions and a shortage of cement inthe country which resulted in a delay in the commissioning of one project component.

2.11 Three main lessons have been learnt from the Bank's previous and ongoing projects withEGAT. First: the need for thorough investigations of geological conditions and provision of adequatecontingencies for civil works for hydro projects; Second: the need for involvement of: (a) relevantpeople and agencies in project design; (b) affected people in designing the compensation scheme; (c)external experts in reviewing project EIAs; and (d) affected persons in oversight committees; and Third:the need for providing adequate reserves in cost estimates for environmental impact mitigation andcompensation. These lessons have been fully applied in the design of the proposed project. In

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particular, extensive field testing has been undertaken to establish the soundness of the site's geologicalconditions.

2.12 Bank participation in the power subsector has helped EGAT to develop into a technicallycompetent and efficient power utility. The Bank's associations with PEA and MEA are orientedtowards achieving major institutional improvements and fostering energy efficiency. Through itscontinuing dialogue with the subsector institutions, the Bank has been instrumental in theimplementation of adequate overall electricity tariff levels, ensuring the sector's financial soundness andthe cost effectiveness of power generation investments. Bank-sponsored sector work in investmentplanning and energy pricing also represented significant contributions towards improving sectorcoordination. Overall, the Bank's presence in the power subsector has helped ensure that utilities weresoundly managed and has encouraged other lenders to provide investment financing for the subsector onfavorable terms.

2.13 In the lignite mining subsector, the Bank has made two loans to EGAT to finance thedevelopment of the Mae Moh mine. The first loan (Loan 1852-TH), which financed expansion ofproduction capacity from 1 million tpa to 2.8 million tpa, was closed in April 1988 and a ProjectCompletion Report (PCR) has been prepared. The second loan (Loan 2407-TH), supporting furtherexpansion of production capacity to 5 million tpa, closed April 30, 1991. Through these two projectsEGAT received substantial technical assistance that has led to improved capabilities in all aspects ofmining operations, including the exploration for and evaluation of lignite reserves in other parts of thecountry. Establishment of a mine accounting system separate from accounts for power operations andthe carrying out of a lignite pricing study have enabled the monitoring of costs and establishment of aninternal lignite pricing formula based on appropriate transfer price agreed with the Bank. The charge toEGAT for lignite is made at an economic transfer price reflecting long-run marginal cost of lignite,which is the sum of EGAT's mining costs and a depletion premium that accounts for the increasingeconomic scarcity value of lignite and the associated cost to the economy of the early use of anexhaustible resource.

Rationale for Bank Involvement

2.14 Through sustained involvement over a number of years, the Bank has contributedsignificantly to the development of the Thai energy sector. With a modest level of lending, the Bankhas been able to exercise significant policy leverage. Bank advice and assistance have helped theGovernment effectively address the issues of: (a) least-cost investment planning, particularly with regardto fuel choices; (b) supply- and demand- side management and resource pricing; (c) power sectorrestructuring and privatization; (d) environmental reforms; and (e) participatory development.However, further work remains to be done in actual implementation of the proposed sector strategies.The project is expected to make a significant contribution in reforming the tariff structure andstrengthening the environmental capabilities of the power sector's dominant entity. In its formulationitself, the project has provided an opportunity for putting into practice the policy for involvement ofaffected persons in rehabilitation/compensation and the Bank expects to supervise this process closelyduring implementation. In addition to its inputs through specific sector work, the Bank's continuingoperational involvement in the Thai power sector is essential to exercise significant influence onGovernment policies towards evolution of the sector in an economically efficient, financially sound andenvironmentally sustainable manner, and for its orderly progress towards reform, restructuring andprivatization.

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2.15 The policies and programs pursued by the Government in the power sector are incompliance with the Bank's policies and guidelines. The project is also consistent with the Bank'sCountry Assistance Strategy (CAS, Report No. 13458-TH). As discussed in the CAS, which waspresented to the Board on September 22, 1994, Bank's support to Thailand aims at providing valueadded in terms of helping Thailand address the most important long-term development issues. Amongthe priority areas for Bank assistance identified in the CAS are development of the physicalinfrastructure and improvement in environmental management to which this project would contribute.Rationalization of the bulk supply tariff would facilitate power sector restructuring and privatization.Strengthening EGAT's environmental capabilities and improving the process of consultation withaffected communities, would upgrade the framework for environmental management.

Chapter III

The Borrower

A. Organization and Management

3.1 EGAT is wholly-owned by the Kingdom of Thailand and comes under the directsupervision of the Office of the Prime Minister. According to its Act, it is responsible for: (a)constructing and operating dams and reservoirs; (b) constructing and operating thermal, hydro, nuclearand other types of power plants; (c) improving and expanding substation and transmission systems; (d)specifying standards, types and sizes for substations, transmission systems, power plants and ligniteplants, and fuel for power production; and (e) formulating policy in connection with power productionand sale of electricity, lignite and other by-products.

3.2 EGAT enjoys broad autonomy in managing its day-to-day affairs but matters relating toplanning, budgeting, pricing, and financing of investments are subject to Government approval.Nevertheless, EGAT's management exercises substantial influence on Government's decisions in thesematters.

3.3 EGAT has grown rapidly into a large organization with a sound structural system. Atpresent, there are 11 members of the Board of Directors headed by a chairman. Of the 11 members ofthe Board, 10 are appointed by the Council of Ministers. The main functions of the Board are to set uppolicy and give advice to EGAT's top executives. The General Manager, who is not appointed, sits inthe Board as one of the directors. He is responsible for implementing the Board's decisions and for day-to-day management. With the exception of the General Manager, all directors who represent governmentinterests and the private sector, act in a part-time capacity. The Internal Auditor is not a member of theBoard but may at his own initiative express his opinions at any of the Board meetings. All Boardmembers have a three year term.

3.4 The present management of EGAT comprises of a General Manager, eight deputy generalmanagers and 15 assistant general managers. The deputy general managers are responsible directly fororganizational management of eight divisions: Policy and Planning; Account and Finance;Administration; Construction; Transmission System Operation; Mining; Power Plant and Operation; andEngineering. Divisional responsibilities are broken down into departments headed by assistant generalmanagers. The Internal Audit Department reports directly to the General Manager.

3.5 In order to increase operational efficiency, EGAT's organization structure (Chart 1) waschanged in November 1993 from a division of business activities according to type of plant, to oneaccording to function. As a result, managerial authority for power plant operations and certain functionssuch as procurement, financing of investments up to certain approved limits, and recruitment of lowerlevel personnel were decentralized to the regions and provinces. However, core activities (power plantand substation maintenance, chemical analysis, environment, etc.) remain under the central office. Thereorganization resulted in the creation of: (a) new groups for Construction, Mining and Engineering; (b)new assistant general manager positions for the Mae Moh and the Bang Pakong Power Plants under thePower Plant Operation Group; and (c) new departments under each assistant general manager (DemandSide Management Office and Computer Office under the Policy and Planning Group, Solid Fuel

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Exploration and Mae Moh Planning and Administration Department under the Mining Group, Mae MohPower and Bang Pakong Power Plant Maintenance under the Power Plant Operation Group, andDevelopment and Planning, Environment, and Civil Engineering under the Engineering Group).

3.6 EGAT's organization structure is still in transition. The current structure may bemodified again in FY95, following management's review of the results of two consulting studies(described below) on EGAT's organization. Both studies have recommended a completely new,decentralized type of organization when EGAT becomes a limited company. As the proposed structuredeviates considerably from the existing EGAT structure, the studies also recommended an intermediateorganizational model, reorganizing EGAT along business units, that could be readily introduced whenEGAT qualifies for GSE status. Both studies in the intermediate stage, propose the same structure anddiffer only in the number of units that would be created. However, the long-run target organizationmodels differ in that one study proposes the creation of independent organizational units operating asbusiness, operative or service units, while the other proposes the creation of generation/transmission,design and construction, maintenance, and subsidiary (for non-core business) companies.

EGAT Effciency Study

3.7 In 1991, EGAT engaged consultants to conduct an operational efficiency study inconnection with the Second Power System Development Project (Loan 3138-TH). The first phase (June-December 1991) analyzed employee attitudes and satisfaction towards EGAT's operational circles,through staff surveys and consultative meetings. The results showed that employees' satisfaction towardsEGAT's operational activities were of a moderately high level with staff giving high ratings for jobenvironment, inter-relationship, communication, and job function. The study recommendedimprovements in four priority areas: management, personnel development, staff welfare, and publicrelations.

3.8 The second phase (October 1992-June 1993) covered eight studies in corporate planning,system dispatch, organization, economic and financial systems, human resources and power systemplanning. The main recommendations for actions in the short term were: (a) introduce a newdecentralized type of organization which should be implemented as soon as EGAT is converted into a"Good State Enterprise" (GSE); as an interim action an "Intermediate Organization" was also proposed;(b) determine new financial corporate objectives by developing a concrete strategy for reduction of costand capital expenditure, tariff adjustments, etc.; (c) decentralize authorities and responsibilities when thenew organization is established to include higher decision-making authorities for all managers; (d)strengthen the management information system; (e) substantially modify EGAT's present budget system;(f) introduce market oriented salaries and benefits; (g) emphasize short-run marginal cost scheduling; and(h) improve the suitable strategic planning process through which objectives are formulated, goals are set,and actions are taken in the short-term. The final report of the study is now being reviewed by EGATmanagement.

EGAT Privatization Study

3.9 In 1991, EGAT contracted the services of financial advisors to lay out a specific plan andpresent recommendations to management for EGAT's privatization. Phase I of the study (June-November1991) provided the background work and created EGAT privatization work teams. This phase concludedwith a privatization plan that was submitted by EGAT to the Government. The Government broadenedEGAT's recommendations and the plan, eventually, became the blueprint for the Government's

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privatization program. Phase II of the Study (May 1993-February 1994) produced recommendations andassociated action plans, including a new organizational structure to prepare for EGAT's corporatizationand eventual privatization. This phase also included a review and implementation plan of EGAT's tariffs,fuel supply contract arrangements, IPP solicitation process, and the restructuring of EGAT into businessunits. The consultants are now preparing their final report and recommendations to EGAT management.

B. Staffing and Training

3.10 EGAT's staff is professional and well-qualified. As of December 1993, EGAT employed34,946 persons, 4,362 at various managerial levels and 29,892 non-managerial positions consisting ofengineers, accountants, technicians and administrative and other skilled workers. About 692 employeesare on temporary status. Three fourths of the staff are between the ages of 25 to 44. More than half ofthe staff (62%) have received some form of higher education, with 19% being university graduates.About 19% of staff are females and half of them have university degrees. EGAT's staff composition andeducational qualifications is presented in Table 3. 1.

TABLE 3.1: EGAT STAFFING EVOLUTION

Increase

FY89 FY90 FY91 FY92 FY93 1989-1993% p.a.

University graduates 5,652 5,980 6,343 6,478 6,583 3.9

Vocational education 11,574 12,662 14,445 14,734 14,948 6.6

Others 14,571 14,511 14,202 13,988 13,250 (2.3)

TOTAL J 31,797 33,153 34,990 35,200 34,781 2 3

3.11 EGAT has a current staffing ratio of 2.63 employees per MW installed and has budgetedfor staff numbers to rise by 3.1 % in 1995 due to the significant introduction of new plants. In line withEGAT's goal of achieving GSE status, management intends to limit staff numbers to no more than 2.5people per MW of installed capacity by October 1995. EGAT has a human resource program in placeto achieve reductions in staff numbers. The program, consisting of a generous compensation packagefor early retirement, was approved in December 1993 and is being implemented to cover all non-technicalstaff and target groups (excluding engineers). With this newly devised incentive and EGAT's normalattrition rate, it expects to meet its targeted staffing ratio in FY95.

3.12 EGAT places considerable emphasis on strengthening of staff training to meet ongoingstructural changes in the power sub-sector and to enhance it own competitiveness. The TrainingDepartment is responsible for delivering effective training, managing human resources, and careerdevelopment. With a staff complement of 74 professionals and 223 support staff, it conducts trainingactivities in EGAT headquarters and three training centers at: (a) Bang Pakong, situated in the centralregion, responsible for training in natural gas and oil fired thermal power plant operation andmaintenance, substation operation and maintenance, and simulator training; (b) Mae Moh in the north,for training in lignite fired thermal power plant operation and maintenance, and simulator training; and

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(c) Tha Thung Na in the west, for hydro power plant operation and maintenance training. From 1986-93,a total of 93,573 staff received training for which EGAT spent a total of Baht 104.5 million.

3.13 EGAT's professional staff, 41% of whom are engineers, is mostly recruited amongcollege graduates trained through in-house and external training courses as well as a system of rotationalassignments within EGAT. During the last year, 14,919 staff participated in 1,713 standard and specifictraining programs designed by the Training Department. About two-thirds of staff were trained underthe standard program and a third under the specific program on technical subjects, quality control,management, etc. Under the standard program, 86 technical courses (e.g. substation operation, digitaltechnology, power plant mechanical maintenance, etc.) and 80 non-technical courses (management andleadership, project planning and control, computer literacy, and general work courses) were provided.Under the specific programs, 11 technical courses and 55 non-technical courses were provided.

C. Operational Performance

3.14 At present, EGAT operates 131 units of various generating stations with a total capacityof 12,626 MW; of which 19% is hydro; 48% conventional oil/gas and lignite-fired thermal; 31%combined cycle; and 2 % gas turbine power plants. With a transmission line length of 20,005 circuit-km,it has 173 substations and 26,351 MVA transformer capacity. EGAT has operated these facilities andtransmission network with high efficiency and reliability due to its good system maintenance as well asits modem and well-equipped control centers. In 1992, EGAT inaugurated three new control centersequipped with modern software and facilities including the Energy Management System (EMS),Supervisory Control and Data Acquisition (SCADA), Man-Machine Interface (MMI) System, and otheradvanced communication systems financed under the Power System Development Project (Loan No.3027-TH).

3.15 Power losses, including both transmission and generation losses, amount to about 9 % ofelectricity produced, with estimated transmission losses being about 4% and auxiliary consumption being5 % of generation. This level is consistent with previous years' levels. Network losses are relatively highwhen compared to those recorded for the more developed power grids of countries such as South Koreaand Japan, but are reasonable in view of EGAT's large transmission system which is still under evolution.

3.16 EGAT is a well-run organization and is capable of managing substantial growth ininvestment because of its strengths in project cost control, implementation and management. In March1992, it received the Operations Management Award from the World Executive's Digest Second AnnualAsia Management Awards program. The award was given in recognition of EGAT's outstandingachievement in raising production capacity in a short time, while maintaining a high standard of service.EGAT has been a Bank borrower since 1957 and has been a recipient of 17 loans. The credit for thesuccessful execution of these Bank projects is due, in most part, to the skill and commitment of EGATstaff in headquarters and at the project sites. The experiences it has gained through the years ofassociation with the Bank also contributed to its good project performance. EGAT is familiar with theBank's procurement guidelines and processes tenders and awards contracts equitably and expeditiously.

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D. Financial Management

Accounting

3.17 EGAT keeps its accounts in accordance with practices of typical modern power utilitycompanies. Its accounting systems and procedures are efficient; transactions such as general ledgers,payroll, inventory transactions, accounts payable, and accounts receivable are fully computerized. EGATprepares an annual budget for capital and operational expenditures and periodic reports to managementenabling comparison of actual against budgeted performance. EGAT has built up a competent andprofessional accounting staff over the years.

3.18 The billing and collection system has been operating satisfactorily. EGAT's accountsreceivables represent amounts due from MEA, PEA and other large customers. For FY93, MEA andPEA settled their September 1993 bill in November 1993, while a long standing receivable due from theSattahip Navy Station of Baht 61 million (relating to sales of electricity between January and August1990) was finally received in October 1993. Accounts receivables have improved from an average of76 days of sales in FY87 to 42 days in FY93, and reflects the efficiency and adequacy of EGAT'soperating system. The practice is also consistent with a Government regulation requiring all stateenterprises to collect receivables within 60 days.

3.19 EGAT has developed an on-line Management Information System. The system, whichhas been in various stages of development since 1984 covers subsystems for personnel, system operation,progress of projects, finance and budget, fuel price and economic tariff, procurement, PDP, financial andeconomic projection, energy demand and supply, records and statistics, and executive information.Although the various subsystems are in operation as independent subsystems, total integration is expectedin 1997 and implementation of the integrated system in 1998.

Audit

3.20 The Internal Audit Department continues to operate effectively reporting directly to theGeneral Manager. A number of operational and management audits, as well as routine audit work, arecarried out by the department with a staff of 92. The department reviews the accounts of each operatingunit throughout the year and prepares between four to five reports, including the year-end financialstatements, which are compiled by the Controller's Department. These reports include the financial auditof accounts, fund account audit of the sinking and pension funds, a stock and inventory account audit,an operational audit that reviews implementation of procurement contracts and compliance withgovernment regulations, and the newly instituted performance audit. The financial audit reports, whichare extensive in coverage, are reviewed by the department primarily for accuracy and compliance withregulations of the Ministry of Finance. For all inventories, the department carries out test checks onhigher value items to ensure that the provisions are adequate. In 1993, the Deputy Prime Ministerrequired all state-owned enterprises to undertake regular management performance audits in line with theGovernment's policy on divestiture. This audit, which will be conducted by EGAT's Internal AuditDepartment in 1995, is a special audit that deals not only with purely financial issues but also withoperational aspects including internal procedures, management audits and efficiency improvementmeasures.

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3.21 EGAT's accounts are audited annually by the Office of the Auditor General, thegovernment agency responsible for auditing all state enterprises. An international accounting firm(Coopers and Lybrand) also acts as external auditors and has been retained as financial consultant,cooperating with the Auditor General in issuing EGAT's annual accounts. Audit reports have never beenqualified since EGAT was established. The submission of the reports to the Bank has always been timelyand the performance of the external auditors has been satisfactory. The auditing arrangements aresatisfactory. As provided under previous Bank loans, agreement was reached that EGAT would submitto the Bank audited financial statements for its mining operations and EGAT as a whole, within sixmonths of the close of each fiscal year.

Insurance

3.22 EGAT has adequate insurance coverage. Property insurance cover for EGAT is providedby means of six insurance sinking funds valued as of September 30, 1993 at US$176 million (Baht 4.4billion), the largest being the Power Plant Fund. These funds provide cover against risks of breakdown,impact damage, explosion and fire, and special perils. A Good Claims Bonus is paid back to EGAT bythe Power Plant Fund and this is calculated according to a formula which takes into account the overallsize of the fund, the insurance risk and the estimated maximum damage that might occur from any oneincident. The bonus represents 87% of premiums charged to the Power Plant Fund and is an indicationof the ongoing good safety record that EGAT has achieved as well as the fact that the size of the fundis close to its maximum. Good Claims Bonuses are not paid by any of the other funds. The maximumsize of the fund has been set at $116 million indexed for inflation after September 30, 1990 and is basedon one potential claim of $50 million and two claims of $33 million.

3.23 The annual premiums charged against revenue by the various funds are calculated in avariety of ways and are in general, below market rates. Premiums paid to the Power Plant Fund,Aeroplane Fund, and the Personal Accident Fund are calculated according to the method suggested bythe Royal Insurance Service Company Ltd. in its 1983 report. Premiums for the Heavy Equipment Fundare calculated and charged on assets until they reach half of their useful life, while premiums of theVehicle Fund are charged on new assets for only one year. EGAT has also insured certain buildingsthrough a Building Fund which was set up in 1993. Cover is provided against fire and the premiumcharged approximates to a commercial rate. Only buildings which have an indexed depreciated cost ofBaht 10 million and over are covered by this new fund. The insurance arrangements are satisfactory tothe Bank and EGAT would continue to make these provisions.

Taxes

3.24 In accordance with regulations applicable to state enterprises, EGAT is liable to remit tothe Ministry of Finance a proportion of its net income. As advised by the Government's Budget Bureau,EGAT has been remitting taxes each year since September 30, 1982 at a level which rose from 5% ofnet income to the current level of 30%. This is despite the fact that the budget document itself laid downa rate of 25%. In May 1993, EGAT applied for "Good State Enterprise" status and to qualify, EGATneeds to comply with a number of criteria, including being able to maintain a net income at a level thatwill permit remittance to the Ministry of Finance of 30%. EGAT is expected to become a good stateenterprise in FY95.

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3.25 EGAT pays custom duties and business taxes on imported equipment and materials forits projects included in the Sixth Development Plan from its own resources. Until the Fifth DevelopmentPlan (1982-1986), custom duties were covered by the Government in the form of equity contributions.

Chapter IV

The Project

A. Project Objectives and Description

4.1 The main objectives of the proposed project are: (a) to assist EGAT in optimizing itsinvestment decisions and help meet the system's peak power demand from 2000 onwards at least cost;(b) to strengthen the environmental capabilities of EGAT; and (c) to assist the Government inrationalizing the bulk supply tariff to PEA and MEA as a prelude to the corporatization andprivatization of the generation, transmission and distribution utilities. In addition, the Bank expects,during the project's tenure, to continue rendering technical advice to the Government in theimplementation of power sub-sector and environmental reforms.

4.2 The proposed project is the first stage (2x250 MW) of the 1,000 MW Lam Takhong PumpStorage Scheme. The scheme involves: (a) pumping during off-peak hours of about 9 million cubicmeters (MCM) of water from the existing Lam Takhong reservoir to a new upper level reservoir; and(b) releasing water into the Lam Takhong reservoir generating about 1,000 MW of power during thesystem peak period. The project involves: (a) an upstream reservoir of 10 MCM capacity; (b) waterconduit systems comprising tunnels and penstocks for the full development; (c) an underground powerhouse for all the four units; (d) 2x250 MW reversible pump-turbine units; (e) an outdoor switchyard; (f)2x230 kV double-circuit transmission lines of about 15km route length; (g) consulting services fordesign and construction supervision; (h) environmental impact mitigation and rehabilitation of affectedpersons; (i) computer hardware, software and training for strengthening the environmental capabilitiesof EGAT; and (j) a consulting study for rationalization of the bulk supply tariff.

Lam Takhong Pump Storage Scheme

4.3 The Lam Takhong Pump Storage project is located at Khao Khuen Lun, Pak ChongDistrict, Nakhon Ratchasima Province, about 200 km north-east of Bangkok. The development consistsof the existing Lam Takhong Reservoir situated on the Lam Takhong River, a tributary of the MunRiver which in turn is a tributary of the Mekong River. The Lam Takhong reservoir would beconnected to a new upper reservoir situated on a plateau some 350 m above, by a system of shafts andtunnels through an underground powerhouse. The powerhouse would contain reversible machineswhich, during off peak periods, would utilize excess generating capacity in the system to pump about 9MCM of water from the lower to the upper reservoir. During peak periods, the operation would bereversed and stored water would be run down for power generation. The total plant capacity of 1,000MW (989 Gwh per annum) would be developed in two stages. The first stage comprising 2x250 MWunits and covering most of the civil works is scheduled for commissioning in 2000. The second stagecomprising an additional 2x250 MW units would be commissioned in 2003.

4.4 The main features of the project are:

(a) an upper reservoir consisting of a rectangular pond with a surface area of 0.3 km2 and avolume of 9.9 MCM bounded by a rockfill dam and lined with an asphaltic membrane;the dam has a maximum height of 50 m and a volume of 5.4 MCM;

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(b) two morning-glory intakes leading to steel lined inclined shafts 6.0 m diameter, 690 m inlength;

(c) an underground power house containing four reversible Francis type generating/pumpingunits, each with an output (while generating) of 250 MW at a rated net head of 360 m.;

(d) two concrete-lined tailrace tunnels 6.8 m dia., 1,470 m in length.

4.5 Optimization. The optimization of the power plant configuration and capacity was carriedout by consultants in two phases. The first phase determined the upper reservoir location and waterwayroute. Of two possible locations for the upper reservoir, the one which avoided relocation ofinhabitants and Class IA forest land, and which also proved to be the most economical, was chosen.For this location, the least cost alternative, among three alternative waterways, was selected. Thesecond phase determined the optimum ultimate size of the plant, in terms of generating capacity anddaily operating hours as limited by reservoir storage. Five alternative capacities between 500 MW to1,200 MW and reservoir capacities between 4 to 14 hour generation (in two hour increments) wereconsidered. A development with 1,000 MW and a reservoir capacity equal to 8 hour generation gavethe maximum benefit/cost ratio. System studies indicated that pumping rate should be limited to 500MW, at least in the early stages, to maintain system stability; hence an installation with 4x250 MWunits was decided upon as the optimum solution. The reservoir filling time with two units running isabout 20 hours.

4.6 Site Investigations. The geological assessment of the site is based on comprehensive siteinvestigations and laboratory tests, which over the course of the feasibility and final design stages haveincluded the following activities: (a) seismic refraction over the reservoir site over four lines totalling3,600 m; test pitting, soil sampling and laboratory testing of soils; (b) diamond drilling totalling 3,172m in 28 holes; testing in drill-holes including 310 permeability tests, 96 deformation tests, 33 hydraulicfracturing tests and P-S wave logging at 294 m; and (c) an exploratory adit to the powerhouse andalong its axis with a total length of 1,533 m; testing in the adit including convergence measurement,plate bearing test and P-S prospecting along its walls.

4.7 Geology. The geology of the plateau on which the upper reservoir is founded, and inwhich the underground works are located, consists of alternations of flat bedded coarse and fine grainedsandstones and siltstones with thin layers of claystone. The penstock from the reservoir floor passesthrough a 60 m thickness of coarse grained sandstone, 150 m of alternations of fine grained sandstoneand siltstone, and 215 m of siltstone ending in fine grained sandstone. The sandstones are hard,generally massive, relatively strong (60 MPa) and have a relatively low deformation modulus. Whilethey are generally of low permeability, there are occasional high permeability areas, coinciding withstrongly jointed zones, particularly in the coarse grained rock. The siltstone is massive, softer, weaker(10 to 30 Mpa), and highly deformable. On the other hand, jointing is generally infrequent andpermeability low. Weathering over the site is highly developed for a depth of 20 m although slightweathering persists to depths of over 70 m. No major faulting has been detected, although shear zonesrunning parallel to the bedding planes are evident in the drill cores.

4.8 Design Aspects. The engineering implications of the above and the design measuresnecessary to deal with them, as agreed among EGAT design engineers, the consultants and theInternational Board of Experts (para. 4.16), are summarized below:

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(a) Upper reservoir. The rock is suitable as a foundation for the proposed embankment dam.Permeability is such that an asphaltic membrane liner and drainage beneath the liner willbe provided. Excavated rock and soil are suitable for incorporation in the dam.

(b) Tunnels. Tunneling conditions are expected to be generally good; however occasionalhigh water inflows are expected and would be allowed for. Silltstone would be protectedimmediately after excavation to prevent slaking. Shotcrete and occasional bolting wouldsuffice as temporary support. The inclined shaft will be continuous and driven full facefrom the top which is slower but less risky in terms of safety and construction progress. Inview of the softness of the silltstone and its tendency to weather, the pressure tunnel willbe steel lined but the design will take rock sharing into account.

(c) Underground powerhouse. The major concern is the high deformability of the rock whichin conjunction with the high insitu stresses due to overburden depth could result in longterm convergence of the walls of the cavern. Measures adopted to deal with this problemwere: (a) orientation of the longitudinal axis of the cavern parallel to the direction ofmaximum horizontal stress; (b) lowering of the cavern about 35 m so that it is situatedlargely in fine grained sandstone, the most competent of the strata encountered; and (c)detailed specification of cavern excavation and support measures to control deformations.

International Waterway

4.9 The Lam Takhong reservoir (which serves the municipal and irrigation water needs of thedownstream communities in the province of Nakhon Ratchasima) is an existing reservoir in theheadwaters of the Lam Takhong River. The Lam Takhong River is an upstream tributary of the MunRiver, which in turn is a tributary of the Mekong River, an international waterway. While the MunRiver contributes about 17% of the flow of the Mekong River, the Lam Takhong River contributes onlyabout 1 % of the flow of the Mun River. The project involves pumping out during off-peak hours ofonly about 3 % of the reservoir volume, but the same quantum of water is restored to the reservoir dur-ing the peak period. The small amount (40,000 cum/annum) of water that would be utilized for dripirrigation from the uphill reservoir would be more than compensated by the decrease in evaporation(estimated at 700,000 cum/annum) due to reduced surface area exposure of the lower reservoir. Therewould thus be no net deprivation of water from the Lam Takhong reservoir nor any effect on the waterquality due to the project. The outflow of water from the Lam Takhong reservoir would continue to begoverned by the downstream water needs and not by the system's generation requirements. The impacton the flow of the Lam Takhong River would thus be insignificant and the impact on the flow of theMun and Mekong rivers would be imperceptible.

4.10 The downstream riparian states are Lao PDR, Cambodia and Viet Nam. Together withThailand, these countries are members of the Mekong Committee, established in 1957 by them as anautonomous inter-governmental agency to promote, coordinate, supervise and control the planning,investigation and implementation of water resources development projects on the lower Mekong basin(including international projects on the Mekong River as well as national projects on tributaries). TheMekong Committee was suspended in 1991 and has apparently not functioned since that date.However, recently, representatives of Thailand, Viet Nam, Cambodia and Lao PDR have pledged toestablish a new framework of cooperation for the sustainable development of the Mekong River Basin.As far as the Bank has been able to ascertain, that framework has not yet been formally established.The three downstream riparian states (Lao PDR, Cambodia and Viet Nam) were notified on December

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15, 1994 of the project by the Bank, through their Executive Directors and were given until February28, 1995 to respond. No communication was received from Lao PDR and Cambodia by the stipulatedtime. Viet Nam asked for more information for studying the project and wanted to be assured thatThailand would notify this project to the newly constituted Mekong Committee at its first meeting inApril 1995. Full details of the project were provided by the Bank to the Vietnamese on March 14,1995 together with written assurances from EGAT that Thailand would indeed notify the project to theMekong Committee. No further communication was received from Viet Nam by the subsequentlyestablished stipulated date of April 3, 1995. As none of the downstream riparians have raisedobjections to the project and in view of the Bank's staff assessment that the project will neither causeharm to the interests of the other riparians, nor be harmed by other riparians' possible water use, it wasdecided to proceed with the processing of the project.

Strengthening the Environmental Capabilities of EGAT

4.11 In 1993, EGAT uplifted its Ecology and Environment Division to departmental level asEnvironmental Department (ED) under the Deputy General Manager, Engineering. It sought andreceived substantial technical assistance from the Australian International Development AssistanceBureau (AIDAB) in strengthening the management, planning and implementation capabilities of the ED.A long-term AIDAB Environmental Planning Adviser has been working with the ED since February1994. A Project for Strengthening the Environmental Capabilities of EGAT (a 4-year program with abudget estimate of A$5.5 million) has been formulated for possible financing by AIDAB. The keycomponents of this Project are:

(a) Environmental Management System. Technical assistance to continue to strengthen anddevelop EGAT's environmental management systems to the standard of "best practiceenvironmental management".

(b) Specialist Environmental, Operational Management and Technical Advice and Assistance.High quality, tailored, specialist advice and implementation assistance in each of theenvironmental, operational management and technical areas identified, to strengthenEGAT's environmental performance and environmental infrastructure.

(c) Environmental Training and Education. Specialist environmental training and educationessential to the sustainable strengthening of EGAT's environmental skills, capabilities andperformance.

(d) Environmental Equipment Facilities. Specification, acquisition and use of additionalenvironmental sampling, monitoring and analysis equipment needed to ensure that thereare no infrastructural impediments to sustainably strengthening EGAT's environmentalperformance.

4.12 Under the proposed project, EGAT would undertake the development of an IntegratedEnvironmental Information Management System (EIMS) package, the objective of which would be toaccept, manage, analyze and structure different sources and types of information required forenvironmental studies and analyses, for engineering site construction referencing, for identifyingcorporate positions and for generating other relevant data. The EIMS would have the followingcomponents:

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(a) Database. This will comprise inter-connected graphics and attribute databases. Thelatter will be a Relational Database Management System (RDBMS) for the storage,management and maintenance of attribute information. The graphics database will be aninteractive, flexible, user-friendly, Computer-Aided-Drafting/Design (CADD) engine forthe storage and maintenance of maps, drawings, airphotos, documentation images, etc.

(b) Interface. The interface would provide user screens to accept different types ofinformation and provide efficient search techniques to extract required information,graphics, etc.

(c) Inputs and Outputs. Inputs would be handled by a variety of application modules, directlyinterfacing with the environment database. Inputs would include scanned, digitized,survey, photogrammetric, remote sensing, digital data, textual information, etc. TheEIMS will support several devices for data output, including those for producing highquality maps, reports, technical publications, image management systems and videooutputs.

(d) Application. The EIMS system would provide access to the same database for differentpurposes, through online viewing. Access to specialized applications would be providedby the system with the automatic linkages to the attribute and graphics databases.Examples of application would be: CADD, spatial analysis, planning, image analysis,terrain modelling, engineering database, business applications, scanning and imaging, etc.

4.13 A feasibility study with consulting assistance would be undertaken to define therequirements, the scope, the recommended hardware and software packages (GIS, CADD, RDBMS,etc.), the interface strategy and an effective implementation plan. The feasibility study would includedetailed description of system components, data flow diagrams, application models, communicationsrequirements, database diagrams, capacities and features within each major component, as well asequipment specifications. Provision would be made for technical transfer and training of EGATpersonnel on the installation, maintenance and application of the EIMS system.

Rationalization of Bulk Supply Tariff to MEA and PEA

4.14 MEA and PEA receive power from EGAT in bulk at several of their grid substations.The bulk supply tariff to MEA and PEA as currently applied comprises a flat energy charge. Withouta demand charge or a variation depending on time of use, the tariff does not reflect the costs of supply,and is, therefore, inadequate to give correct signals to the distribution utilities to improve their loadfactor, load shape and power factor or foster energy conservation. The bulk supply tariffs to MEA andPEA are set by the Government, taking into account the financial needs of the three utilities. Thecurrent tariff for bulk supply to MEA is 1.47 Baht/kwh, whereas the tariff to PEA is 0.96 Baht/kwh,although the actual cost of supply to PEA is greater than the cost of supply to MEA. The difference inthe tariff to the two utilities, MEA and PEA, is intentional, so that the urban consumers subsidize therural consumers, the retail tariff for all consumers in Thailand being uniform. The current bulk supplyarrangements between EGAT and MEA/PEA would no longer be appropriate when the electricity sectoris restructured; EGAT, MEA and PEA are corporatized; and IPPs begin to function on the grid. Newbulk supply arrangements would need to be evolved. If a subsidy needs to be provided for electrifyingrural consumers, it may have to be provided through a separate transparent mechanism. Likewise, theGovernment would also need to consider abolishing uniform retail tariffs throughout the country. At

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negotiations, agreement was reached that EGAT would undertake a study for the rationalization of thebulk supply tariff, according to terms of reference agreed with the Bank, and promptly thereafter, theGovernment will review with the Bank the recommendations of that study and implement the saidrecommendations taking into account the Bank's views. Terms of reference for the study are at Annex10.

B. Implementation

4.15 Design and Supervision Arrangements. The project design would be undertaken jointly byEGAT and the consultants, EPDC of Japan. EGAT would carry out the civil designs, includingdrawings and technical specifications under the supervision of the consultants. The consultants woulddevelop the technical specifications for the mechanical and electrical equipment. The terms of referencefor the consulting services are acceptable to the Bank. The construction organization would bemodelled on the lines of the Pak Mun Hydropower project which was recently completed on schedule.A Project Implementation Plan, following the Bank guidelines, has been prepared by EGAT (Annex24). The organizational arrangements for design and construction of the Lam Takhong Pump Storageproject and implementing its environmental and rehabilitation plans are shown in Charts 2, 3 and 4,respectively. A project team has been set up and a project manager appointed by EGAT for projectconstruction. The functions of the "Engineer" as defined by the FIDIC conditions of contract would beassigned to EPDC, although in keeping with its normal practice, EGAT would maintain strong financialcontrol.

4.16 Review Arrangements. An International Board of Experts (IBE), has been appointed toreview dam safety aspects of the design and construction of the upper reservoir, and to advise on designand construction aspects of all other elements of the project. The IBE consists of internationallyrecognized experts, with wide experience in engineering geology, rock mechanics and undergroundopening design; and design and construction of dams and hydroelectric structures. Interaction betweenEGAT engineers, the consultants and the IBE has been particularly synergetic, resulting in innovative,affordable design responses to the particular challenges of the project. The bid documents for theElectromechanical Equipment would be furnished to the Bank. The implementation of theenvironmental and rehabilitation plans would be periodically reviewed by the independentEnvironmental Panel member appointed by the Bank.

4.17 Implementation Schedule: A summary implementation schedule is shown in Chart 5.The critical path for implementation of the project passes through the construction of the main accesstunnel to the powerhouse, powerhouse cavern excavation and generating equipment erection. With thisin mind, EGAT has called for bids on a limited invitation basis for access tunnel construction to befinanced by EGAT. Nine well qualified contractors, two local and seven international presentlyworking in Thailand, have been invited to bid. Construction of this access tunnel would allowconstruction time from award of main civil contract to award of first generating unit to be reduced to 52months. Bids for main civil and generating equipment contracts are scheduled to be invited in March1995, contracts awarded in October 1995, with unit commissionings in February and May, 2000.

4.18 Operations. EGAT has defined organization and procedures for dealing with dam safetydating since 1982, when it issued Dam Safety Regulation for controlling the safety of its dams. The

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Civil Maintenance Department has been given the responsibility for dam safety and this organization hasdeveloped procedures based on the SEED manual published by the Water and Power Resources Service,U.S. Department of Interior. They provide for inspections by an 11 member Dam Inspection Team, inaccordance with a schedule determined by dam height, and following a defined checklist. They alsospecify routine dam safety measures to be implemented by dam operators and regional superintendents.These procedures have been satisfactorily implemented for EGAT's 13 existing large dams. Atnegotiations, agreement was reached that EGAT would, under arrangements satisfactory to the Bank,cause the upper reservoir dam to be periodically inspected in accordance with sound engineeringpractice in order to determine whether there are any deficiencies in the condition of this structure, or inthe quality and adequacy of maintenance or methods of operations of the same, which may endanger itssafety.

Monitoring and Reporting

4.19 Satisfactory procedures for monitoring the progress of the project in terms of physicalexecution and financial reports have been agreed with EGAT which would furnish quarterly progressreports. An Implementation Completion Report (ICR) would be drafted by the Bank not later than sixmonths after completion of the loan and EGAT would assist in its preparation. EGAT would adopt theplan for the operational phase of the project and together with the Bank, define the performanceindicators to be used to monitor operations and development impact. EGAT would also prepare andmake available to the Bank its own evaluation report, including a summary report which would beattached unedited to the ICR. The evaluation would assess the project execution and initial operation,its costs and benefits, the Bank's performance, its own performance of the obligations under the LoanAgreement, and the extent to which the purposes of the loan were achieved.

Supervision Plan

4.20 Supervision of this project would be undertaken along with the Bank's ongoing powerprojects in Thailand. The key issues that would be focused upon are: (a) periodic reviews of EGAT'spower development plan in keeping with changes in the economic scenario; (b) monitoring ofcompliance with financial covenants to assure the financial health of EGAT while undertaking a largeinvestment program; (c) close monitoring of the implementation of the environmental impact mitigationand rehabilitation plans for the project; and (d) adequate technical supervision for the dam andassociated civil works. The Bank missions would also assist EGAT and the Government in their effortstowards privatization and energy conservation and provide advice on environmental issues. Supervisionof the project would require expertise in hydropower engineering, economics, financial analysis,environmental engineering and rehabilitation and compensation. Two missions annually for a period offour years are foreseen for adequate supervision of this project. The total estimated staff inputs are: (a)power engineer, economist and financial analyst -- 8 staff-weeks (on the basis of sharing with otherEGAT projects); (b) hydropower engineer -- 8 staff-weeks; (c) environmental specialist -- 6 staff-weeks; and (d) rehabilitation expert -- 6 staff-weeks.

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C. Cost Estimates

4.21 The total cost of the project (including capitalized interest during construction) is estimatedat US$585.6 million, with a foreign exchange component of US$308.4 million. For civil works, directcost unit rates were developed from basic resource costs for all major items, with separate estimates forgeneral site installations and general site services. Metalworks costs were derived from prevailinginternational market rates in recent bids. Electro-mechanical costs were derived taking into accountexperience curves and manufacturers' budget prices. Physical contingencies are assumed at 10% of thebase cost for preliminary works, civil works and environmental and rehabilitation plans and 5% of thebase cost for plant and equipment. Price contingencies are estimated on the basis of escalation factorsof 5 % per annum for local cost components and 2.5 % per annum for foreign cost components,following the Bank's latest forecast. Table 4.1 summarizes the cost estimates for the project which aregiven in greater detail in Annex 11.

Table 4.1: COST ESTIMATE /a

Local Foreign I Total Local Foreign I Total Foreign

(Baht million) (US$ mitlon) /b | Tof

Preliminary Works 186.0 0.0 186.0 7.5 0.0 7.5 0.0

Environmental Mitigation 184.6 0.0 184.6 7.4 0.0 7.4 0.0

Civil Works 1,270.0 2,965.0 4,235.0 50.8 118.6 169.4 70.0

Hydraulic Equipment 401.0 804.0 1,205.0 16.0 32.2 48.2 66.8

Electromech. Equipment 344.5 2,060.3 2,404.8 13.8 82.4 96.2 85.7

Transmission System 83.3 460.9 544.2 3.3 18.4 21.7 84.8

Environmental Equipment 0.0 17.5 17.5 0.0 0.7 0.7 100

Consulting ServicesProject Management 74.6 334.7 409.3 3.0 13.4 16.4 81.7Tariff Study 0.0 5.0 5.0 0.0 0.2 0.2 100

Administration 259.9 0.0 259.9 10.4 0.0 10.4 0.0

Duties and Taxes 450.9 0.0 450.9 18.0 0.0 18.0 0.0

Base Cost 3,254.8 J 6,647.4 J 9,902.2 J 130.2 266.0 J 396.2 67.1

Physical Contingencies 309.0 556.9 865.9 12.4 22.3 34.7 64.2

Price Contingencies | 611.2 505.7 1,116.9 24.4 20.2 44.6 45.3

Total Project Cost 4,175.0 7,710.0 11,885.0 167.0 308.4 475.4 [ 64.7

I.D.C. | 2,755.0| 0.0] 2,755.0 110.2 | 0.0 110.2 | 0.0

Total Financing Required 6,930.0 7,710.0] 14,640.0 277.2 308.4 585.6 | 1.6

/a December 1994 price levels.lb Exchange rate US$1 = Baht 25.0

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D. Financing Plan

4.22 The financing plan for the project is shown in Table 4.2. The proposed Bank loan ofUS$100 million equivalent would meet about 33% of the foreign cost of the project (excluding IDC) or17% of project financing requirements. The proposed Bank loan would be made to EGAT at theBank's standard variable interest rate for a 17 year term including five years of grace on repayment ofprincipal. Cofinancing from OECF of Japan, in the amount of about US$184 million, would coverelectromechanical equipment, hydraulic equipment and consulting services. Supplier's credits andforeign commercial bank loans would be used to finance the foreign costs (aggregating US$24.4million) of ancillary equipment. Local costs amounting to US$277.2 million equivalent would befinanced from EGAT's internal cash generation supplemented by local borrowing. EGAT would bearthe foreign exchange and interest rate risks; the loan would be guaranteed by the Kingdom of Thailand.

Table 4.2: FINANCING PLAN(US$ million)

Local Foreign Total

IBRD 100.0 100.0

OECF 184.0 184.0

Foreign Commercial Banks 24.4 24.4and Supplier's Credits

EGAT/Local Borrowing 277.2 0.0 277.2

Total 277.2 308.4 585.6

E. Procurement

4.23 Almost 99% of the Bank loan would be used for financing the major civil works for theproject. Bids would be invited using international competitive bidding procedures (ICB) according tothe Bank guidelines, through a single contract package worth about US$203 million equivalent. Biddershave already been prequalified to bid for this package, using prequalification documents and proceduresapproved by the Bank. EGAT would follow the Bank's standard procurement documents in preparingthe bid documents. The contract would allow for price variation for parameters agreed with the Bank.Environmental equipment, essentially comprising specialized software and hardware, worth aboutUS$0.75 million equivalent would be procured through Limited International Bidding or InternationalShopping procedures following the Bank guidelines. Consulting services for the Tariff study,amounting to about US$0.25 million equivalent, would be procured following the Bank guidelines forselection and employment of consultants. Bid documents and contract awards with respect to eachBank-financed contract, estimated to cost the equivalent of US$2.0 million or more, would be subject toprior review and approval by the Bank.

4.24 The main electromechanical equipment would be procured through internationalcompetitive bidding procedures specified by the OECF of Japan. Contracts for ancillary equipmentwould be obtained through EGAT's own international competitive bidding procedures which are similarto those of the Bank. Contracts for preparatory civil works would be let out by EGAT through local

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competitive bidding procedures that are acceptable to the Bank. Consultants for project design andsupervision have been appointed by EGAT and the consultancy arrangements are satisfactory to theBank.

4.25 Annex 12 presents the Key Date Schedule for procurement, while Annex 13 gives detailsof the eight procurement packages (excluding environmental equipment) for the project.

4.26 Table 4.3 summarizes the procurement arrangements for the components expected to befinanced out of the proposed Bank loan.

Table 4.3: SUMMARY OF PROCUREMENT ARRANGEMENTS /a(US$ million)

Project Procurement Method | Total

Component ICB Others Lb NBF /c Cost

Works

Upper Pond, Water Way, Power House 203.5 203.3(99.0) /a (99.0)

Other works 9.0 9.0

Goods

Hydraulic Equipment /d 57.8 57.8

Electromech. Equipment /d 115.4 115.4

Transmission System /d 26.0 26.0

Environmental Equipment 0.75 0.75(0.75) (0.75)

Consulting Services

Project Management /d 19.7 19.7

Tariff Study 0.25 0.25(0.25) (0.25)

Miscellaneous

Environmental Mitigation 9.0 9.0

Administration 12.5 12.5

Duties and Taxes 21.5 21.5

203.5 1.0 270.9 1 475.4Total (99.0) (1.0) (0.0) (100.0)

Notes: /a Figures in parenthesis refer to amounts to be financed from the Bank loan./b Others - Procurement through Limited International Bidding or International Shopping and

procurement of consulting services./c NBF - Not Bank Financed./d Financed by OECF.

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F. Disbursements

4.27 The Bank loan would be disbursed against: (a) 50% of expenditures for civil works; (b)100% of foreign expenditures and 100% of local expenditures (ex-factory cost) and 50% of localexpenditures for other items procured locally, for goods and equipment; and (c) 100% for consultingservices. As there would be only about three contracts, Statement of Expenditures (SOE) procedureswould not be followed nor would a Special Account be opened. However, EGAT will ensure that eachwithdrawal application will not be less than US$100,000 equivalent.

4.28 Annex 14 gives the disbursement schedule for the proposed Bank loan and the standardprofile of disbursements for power projects in Asia. Based on experience with the last two Bank loansto EGAT (Loans 3138-TH and 3243-TH), the advanced stage of preparation by EGAT for the project,and considering that there is only one major contract financed by the Bank, the proposed loan isexpected to be disbursed faster than indicated by the standard profile. The project is expected to becompleted by June 30, 2000 and the closing date for the loan would be December 31, 2000.

4.29 Retroactive financing equivalent to about 3% of the proposed loan would be permitted tothe extent of US$250,000 equivalent for payments made for expenditures on consulting services for theTariff Study, prior to the date of the Project Agreement but after August 4, 1994. This is necessary asthe Government would like this study to be carried out as early as possible as it would like to introducetariff reforms this year and in order to meet its privatization program for the power sub-sector.

CHAPTER V

Environmental Aspects

A. Environmental Impact Evaluation and Approval

5.1 The project falls under Category A and its environmental impacts have been adequatelyidentified through a detailed EIA undertaken by the Khon Kaen University. The EIA and thesupplementary documentation developed by EGAT has undergone the newly constituted review processinvolving the Office of Environmental Policy and Planning (OEPP) (including review by anEnvironmental Expert Committee having NGO representation) and the National Environmental Board,and the project and the EIA have been approved by the National Economic and Social DevelopmentBoard and by the Cabinet. The people in the district have been informed about the project throughseminars and the affected villagers have been fully involved in designing the rehabilitation program.The OEPP has finalized and published a detailed "Implementation Plan - Environmental Mitigation andDevelopment", January 1994 (EMDP), which inter-alia calls for the appointment of a coordinating andsupervisory committee, named the Committee for the Coordination of Assistance to the Affected Peopleand Environmental Development, comprising representatives from all concerned departments andagencies, from local and provincial administrations, and from affected people; and assigns the role ofmonitoring and evaluation to the Ministry of Science, Technology and Environment. There has beenclose interaction between EGAT, the Bank missions and the Environmental Expert appointed by theBank, and the Bank requirements supplementing the EMDP have been agreed with and documented byEGAT in the "August 1994, Addendum to the Implementation Plan, Environmental Mitigation andDevelopment". The EMDP, adopted by the Government on February 15, 1994, sets forth therequirements for managing the environmental protection of all land and river areas affected by theproject, and for rehabilitating affected persons. The August 1994 Addendum to the aforementioneddocument amplifies the modalities and procedures for rehabilitating and compensating all persons whoselivelihood is to be affected by the project, and details the necessary actions for implementing andperformance indicators for monitoring. The two documents together form the plan for implementingthe environmental mitigation and development and rehabilitation required under the project. Annex 24lists the environmental documentation on the project. The environmental impact mitigation andrehabilitation plans are satisfactory to the Bank. At negotiations, it was agreed that EGAT would carryout the Environmental Impact Mitigation and Rehabilitation Plans as set forth in the documents: (a)Implementation Plan - Environmental Mitigation and Development, January 1994, by OEPP; and (b)August 1994, Addendum to the Implementation Plan, Environmental Mitigation and Development, byEGAT, including provision of necessary budget, appointment of committees for managing andsupervising implementation and agencies for monitoring and evaluation.

B. Enviromnental Impact and Impact Mitigation

Base Line Data

5.2 Baseline data, developed by Khon Kaen University (KKU) during an 18-month (August1990 to February 1992) environmental assessment study and by several subsequent investigations byEGAT and KKU, are briefly summarized below:

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(a) The Lam Takhong Reservoir has been in operation since 1968. Reservoir fisheries yieldapproximately 95 tons/year of fish valued at Baht 2.5 million for an estimated 100 part-time fishermen and 3 full-time fishermen. These yields occur with only occasionalstocking and with no other enhancement measures other than Government regulations onfishing methods and seasons.

(b) The 22 ha that would be required for spoil disposal extend from the existing highway intothe shallow edge of the Lam Takhong reservoir. This area would be an extension of theexisting highway grade, is not inhabited and includes no notable vegetation.

(c) The 218 ha upper reservoir area is located on land that is included in watershed Class lB.Some of the underground structures will be located well beneath, and would not impingeon, land that is classified as watershed Class IA.

(d) Land use of the upper reservoir area would include 59 ha of forest plantation area and 159ha of agricultural land. The agricultural land comprises grassland and fallow land,cultivated land, degraded forest land and others. There is no irrigation. Crops cultivatedin the area include mango, cashew, jackfruit, cassava and others.

Potential Environmental Impacts

5.3 Potential adverse impacts of the project have been under systematic investigation andreview by KKU, EGAT and concerned environmental authorities since August 1990. Fieldinvestigations included searches of all areas affected by the project for rare and endangered species, rareor unique ecological communities and archaeological materials, but none of these items were found.The project does not pose any impacts of a nature that cannot be eliminated, minimized to acceptablelevels or mitigated through project design, location and operation and it is unlikely to result insignificant residual impacts. Notable project impacts are given below:

(a) Land. The main impact of the project would be caused by the construction of the upperreservoir and would include: (i) displacement of 59 ha of established forest plantations; (ii)loss of access to 218 ha area during the construction stage; (iii) permanent loss of accessto 65 ha which will become the upper reservoir and ancillary areas; (iv) changes in soilcharacteristics due to excavation, spoil disposal and regrading; and (v) associated losses ofagricultural produce and income.

(b) Fisheries. The main impact on fisheries is expected to be increased mortality of fishthrough entrainment and exposure to high pressure in the penstocks during pumping.Phytoplankton and zooplankton mortality due to entrainment is not likely to be significant.

(c) Downstream Water Users. There is concern among downstream users that constructionand operation of the project would result in losses of water, or constraints on reservoiroperation, that will affect the availability of water to downstream users. However, thisconcern is not justified as: (i) the pump storage project will recycle water, not consume it;and (ii) rules for reservoir operation will give priority to downstream users.

(d) Sedimentation. Resuspension of sediment as a result of pumping and power generation isnot likely to cause significant ecological impacts on the Lam Takhong reservoir or to

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increase the amount of sediment that is entrained by the intakes for the downstream watersupply. Hydrographic studies conclude that about 370 years would be required for thevolume of sediment deposition to equal the volume of dead storage. By that time the livestorage capacity of the reservoir would have been reduced by about 34%.

(e) Construction. Other impacts would be typical of any large construction projects such asimpacts of the construction labor force, truck traffic, erosion, air and water pollution,noise and public health.

Environmental Impact Mitigation Plans

General

5.4 The mitigation measures for environmental impacts are embodied in the EMDP andinclude:

(a) Plan for environmental mitigation and development during construction:

(i) Prevention of soil erosion(ii) Control and prevention of sediment dispersion in the reservoir(iii) Prevention of air pollution, noise and vibration(iv) Mitigation and development of traffic system(v) Preparation for hygiene at the construction site

(b) Plan for environmental mitigation and development after construction:

(i) Environmental rehabilitation and development in the project site includingreforestation of 1,230 ha of the most degraded forest in the Khao Tien-KhaoKhuanlon Reserved Forest Area

(ii) Fishery resource conservation in the Lam Takhong reservoir(iii) Water resource management

5.5 The plan for controlling and offsetting fish mortality from entrainment includes: (a) a netaround the intake structure with 0.5 cm mesh size; (b) fish breeding and releasing including a fishhatchery, nursery ponds, floating nets and fish cages; (c) fishery resources conservation including theprotection of spawning areas and reduction of illegal fishing; and (d) continued monitoring of reservoirlimnology and fisheries.

Monitoring and Evaluation

5.6 The EMDP includes a monitoring plan which comprises the following:

(a) Plan for monitoring and evaluating the forest rehabilitation

(b) Plan for monitoring and evaluating of the aquatic biology and fishery in the Lam Takhongreservoir

(c) Plan for monitoring and evaluating of the water resources management

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5.7 The plan for monitoring and evaluation of water resources management is intended toalleviate the concerns of downstream users by having OEPP and the Royal Irrigation Department: (a)collect and compile necessary data for the continuous management of Lam Takhong water resources;and (b) conduct regular compilation and analysis of data for the future adaptation of water resource.The project cost estimate includes funding for this monitoring and evaluation for the first six years afterthe start of project operations.

Budget

5.8 A total budget provision of Baht 87.7 million has been made for mitigation ofenvironmental impacts (see Annex 15 for details).

C. Rehabilitation

Scope of Rehabilitation

5.9 The construction of the upper reservoir requires acquisition of 26 ha of land, in 74parcels, belonging to 72 owners. 43 of the owners reside at the Khoa Yai Tiang village while 29owners reside in villages of different sub-districts or districts of Nakhon Ratchasima or differentprovinces. Houses of none of these owners will be affected by the project and hence no resettlement ofpersons will be involved. In addition to those whose lands would be affected, some 100 families fishingin the lower reservoir may be affected. A study to determine the precise impact on the income levels ofthe fishing families is currently underway.

Socio-Economic Survey

5.10 The socio-economic features of the community affected by the project have been studiedby the Khon Khaen University. Most of the affected families partially rely on agriculture for income.Agriculture is of the rainfed type and therefore the affected people supplement income from agricultureby pursuing non-farm activities such as animal rearing, wage labor etc. Almost 42% of their annualincome is derived from earnings of those family members who temporarily work outside the area. Theannual average income per family is estimated at Baht 40,910 and the median income at Baht 38,640.The average annual agricultural income from land required for the project is estimated at Baht 16,500.

Rehabilitation Strategy

5.11 The basic principle governing economic rehabilitation of the affected people would be that"living conditions and quality of life of the affected people should improve". Compensation for theaffected land and properties would be paid at a rate which is equivalent to the replacement value of theassets lost. In order to achieve the rehabilitation objective, a mix of land based and non-land basedeconomic rehabilitation is proposed. Apart from arrangements for long term rehabilitation, short termmeasures to supplement income during the transition phase are also proposed. The affected personswould be: (a) provided replacement value of compensation for the assets lost; (b) allocated 0.8 ha ofland per household for horticulture; (c) provided with cash support for the first four years after landacquisition; (d) given loans for initiation of preferred economic activities; and (e) given grazing rights

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over the forest area in the vicinity of the project. The implementation of the rehabilitation program hasbeen divided into four distinct phases: (a) before construction; (b) during construction; (c) afterconstruction; and (d) monitoring and evaluation.

Framework for Rehabilitation

5.12 A detailed rehabilitation policy has been framed by EGAT specifically for the LamTakhong Project. The policy, which has been designed with the active participation of the affectedpeople, will be implemented by a committee composed of representatives of EGAT, local officials andpeoples' representatives. The Implementation Plan - Environmental Mitigation and Development,January 1994, approved by OEPP and the August 1994 Addendum to the Implementation Plan,Environmental Mitigation and Development, by EGAT provide the rehabilitation framework forimplementation. The following is the list of measures which would assist the affected persons improvetheir existing standards of living:

(a) compensation for land at a rate of Baht 103,000/ha;

(b) compensation for 18 species of fruit trees at varying rates;

(c) improvement of the living conditions in the affected villages before the project starts,through: (i) repair (lining) of an existing weir to improve dry season water supply; (ii)allocation of budget to village development funds; (iii) establishment of village medicinefunds; (iv) support of educational activities; (v) support of religious activities at the end ofconstruction; and (vi) resurfacing of the 5 km road to the village with asphalt paving;

(d) establishment of cooperatives;

(e) loaning of up to Baht 250,000 per family through the agricultural cooperatives, for animalfarming;

(f) granting of Baht 2,000 per month for four years to the holder of each of the 74 landparcels for animal farming or other initiatives;

(g) making available 1,696 ha of adjacent reserve forest for grazing;

(h) providing occupational training including EGAT-financed training, at the non-formalEducation Center in Nakhon Ratchasima, in industrial skills, construction skills, generalagriculture, weaving, dress making and tailoring;

(i) encouraging employment of affected villagers by contractors;

(j) providing 0.8 ha to the holder of each of the aforementioned 74 land parcels fordevelopment of fruit trees;

(k) providing nursery stock to establish orchards on 0.8 ha parcels;

(1) subsidizing the planting of the nursery stock and the maintenance of the orchards untilthey bear fruit (fifth to tenth years after the start of construction);

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(m) providing 40,000 m3/yr of water and a drip irrigation system for starting the orchards;

(n) providing a 12.8 ha community forest plantation; and

(o) employing affected persons to carry out the reforestation of 1,230 ha in the Khao Tien -Khao Khuanlan Reserved Forest Area.

Organizational Arrangements

5.13 The coordination and supervision of the implementation of the rehabilitation programwould be carried out by " The Committee for Consideration of Assistance to the Affected People andEnvironmental Development". This committee, chaired by the Governor of Nakhon Ratchasima,consists of members from EGAT, the local governments of the concerned districts, the variousdepartments involved in implementation of the rehabilitation program and representatives of the affectedpeople. To facilitate the process of implementation of the rehabilitation plans, the following sub-committees have been formed:

(a) Sub-committee for Property Survey.

(b) Sub-committee for Inspection and Remittance of Compensation.

(c) Sub-committee for Public Relations.

(d) Sub-committee for Quality of Life Development and Occupational Promotion.

5.14 The apex committee would make the decisions related to compensation and rehabilitationwith the participation of the affected people and local officials. The budgetary implication of thesedecisions would be borne by EGAT which would allocate the required funds to the respectivedepartments responsible for implementing specific programs.

Grievance Redressal

5.15 Since the process of rehabilitation planming has been carried out with the full participationof the affected people, there are not likely to be many instances of serious grievances duringimplementation. However, in order to ensure that the rehabilitation program is implemented asdesigned and approved by the affected people, the apex committee will have representatives from theaffected community. Aggrieved persons could apply to the respective committee dealing with the issueand the matter will be decided on merit. An affected person dissatisfied by the decision of thiscommittee, could appeal to the apex committee headed by the provincial governor.

Participation

5.16 EGAT and the local government initiated the process of participation of the affected peoplefor planning the rehabilitation program. A "village development committee" was formed almost a yearbefore the project was given the final official approval, for discussing the various components of therehabilitation program. A number of community development programs and infrastructure developmentprograms were finalized based on these discussions. The various elements of the rehabilitation programhave emerged from this regular, sustained and participatory process of decision making.

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Budget and Timetable

5.17 A detailed budget and the agencies responsible for implementing the program are given inAnnex 15. A budgetary breakdown is given below:

Name of Plan Budget in million Baht

a. Public Relations Plan: 10.00b. Compensation Plan: 42.00c. Quality of Life Development Plan 21.65d. Plan for establishment of cooperatives 24.43e. Occupational Promotional Plan 23.87f. Land Allocation Plan 7.00g. Socio-economic monitoring Plan 2.50

Total 131.45

5.18 Adequate provision has been made for contingency funds in the main Lam TakhongProject. If any of the rehabilitation programs require greater funds than originally anticipated, thecontingency funds from the main project would be drawn upon for the purpose.

Monitoring and Evaluation

5.19 The rehabilitation plans would be monitored both internally and externally. Internalmonitoring would be done by the apex provincial committee and the Lam Takhong project office inEGAT. Progress in implementing various components would be reported to the Office ofEnvironmental Policy and Planning and to the office of the National Economic and Social DevelopmentBoard. These organizations would monitor and evaluate the progress through periodic reportssubmitted by the project office and through regular field visits. Monitoring of the rehabilitationprogram would include, inter alia, payment of compensation, providing membership to affected personsin cooperatives, allocation of land, income levels of rehabilitated persons and employment of affectedpersons in various activities.

D. Transmission Lines

5.20 Environmental investigation of the transmission lines covered by the project (Phase I) wascompleted by Khon Kaen University in December 1992. The lines will require a Right of Way (ROW)of 27.3 ha that includes 6.3 ha of Watershed Class 4B land, 7.8 ha of Class 2B land, 12.6 ha of Class2A land and 4.4 ha of Class lB land. The line will traverse 1.8 km of agricultural land, 5.0 km ofdegraded forest and 0.15 km of second growth forest. There are no dwellings within or near thisproposed ROW.

5.21 The following would be the criteria for compensation for those affected by transmissionlines. These criteria are acceptable to the Bank.

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(a) Paddy field or cultivated land in the ROW - 50% of the determined value (i.e.replacement value) and the user would be permitted to continue cultivation.

(b) Orchard/farm land in the ROW - 70% of the determined value and the user would bepermitted to continue other cultivation such as cash crop.

(c) Residential land in the ROW - 90% of the determined value and the dwelling would haveto vacate from the ROW. Structures within the ROW will be paid with replacement value(including dismantling cost, transfer cost and the cost of reconstruction).

(d) Tower location - 100% of the determined value and the user or occupant would have tovacate the premises.

(e) Perennial trees - the compensation will include breeding cost, planting, fostering andopportunity cost as appropriate.

5.22 The representatives of the affected people would be members of the committees and sub-committees formed for planting and implementing the compensation and rehabilitation program. If anyof the affected people are aggrieved by the rehabilitation process, they could register their appeals to thecommittee responsible for receiving complaints and petitions.

5.23 Environmental investigation of the Phase II transmission lines is currently in progress andscheduled to be completed in June 1995. ROW requirements of the Phase II transmission lines willbecome available in February 1995. At negotiations, agreement was reached with EGAT that Phase IItransmission lines would be constructed only after the environmental investigation reports and necessarymitigation measures have been approved by the OEPP and reviewed by the Bank.

Chapter VI

Financial Analysis

A. Past Financial Performance

6.1 A summary of EGAT's consolidated (generation, transmission and mining) financialperformance is presented in Table 6.1 while the detailed statements are given in Annex 16. EGAT'sfinancial performance for the period FY89-93 has been satisfactory.

Table 6.1: SUMMARY OF EGAT'S FINANCIAL OPERATING STATISTICS, FY89-93(Baht million)

Fiscal Year ending September 30 | 1989 I 1990 1 1991 | 1992 [ 1993

Energy sales (Gwh) 33,701 39,369 44,773 50,771 56,558

Average revenue (B/kWh) 1.26 1.26 1.26 1.22 1.20

Operating revenues 42,649 50,410 57,215 62,702 68,463

Operating expenses 29,951 34,872 43,428 47,841 53,619

Operating income 12,698 15,538 13,787 14,861 14,844

Net income 7,628 10,411 9,300 9,109 8,052

Rate base 95,536 133,357 139,255 156,069 184,319

Long-term debt 62,141 74,205 90,268 99,461 117,237

Primary ratios:

Rate of return (%) 11.7 11.3 8.2 6.7 5.5

Debt service coverage (times) 1.4 1.7 2.2 1.7 1.4

Operating ratio (%) 70 69 76 76 78

Current ratio (times) 1.1 0.9 1.0 0.8 0.7

Debt/Equity ratio 0.75 0.64 0.74 0.72 0.81

Self-financing ratio (%) 33 30 39 28 27

6.2 During the period FY89-93, EGAT's energy sales grew at an annual average of about14%, from 33,701 GWh in FY89 to 56,558 GWh in FY93. Since 1989, EGAT has experienced highgrowth rates in energy sales attributable to rapid industrial expansion, progressing rural electrificationand people's changing lifestyles.

6.3 EGAT's financial results for the last five years show that it is a profitable and efficientorganization. Its self-financing ratio and the rate of return on net revalued assets in operation haveremained relatively high throughout the FY89-93 period, averaging 31 % and 8.7%, respectively.

6.4 The introduction of the value added tax (VAT) in January 1, 1992 had a significant effecton EGAT's operations. When VAT was introduced, the prices of energy sold by EGAT were maintainedat previous levels and were not increased by the 7 % VAT charge. The sales price therefore became VATinclusive and EGAT had to account for the VAT as a tax on output so that sales revenue suffered

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accordingly. With effect from October 1, 1991 (i.e., FY92), the Government agreed to a new tariffstructure that would allow EGAT to make sales price adjustments if there were increases in its costs asa result of VAT and increases in fuel prices. However, the Government requested that no adjustmentsbe made on the tariff until June 1, 1992, by which time the full effects of the introduction of the VATwould have been known.

6.5 Despite the negative effect of the VAT on EGAT's revenues, two factors compensatedfor this so that EGAT was still able to achieve a healthy financial performance in FY92. First, additionalrevenues of Baht 646 million, Baht 748 million and Baht 848 million were earned by EGAT, MEA andPEA, respectively, because of the favorable change in actual consumption pattern as opposed to thatexpected in the pricing plan envisaged in the new tariff structure. As part of the overall deal tocompensate EGAT for the loss of revenue during the months of January to May 1992, the Ministry ofFinance (MOF) agreed that Baht 1.5 billion of the additional revenues earned by MEA and PEA shouldbe passed to EGAT. Second, the business tax, which had been paid on most materials, was abolishedand replaced by VAT enabling EGAT to claim it back as tax on input.

6.6 In accordance with regulations applicable to state enterprises, EGAT is liable to remit aproportion of its net income to the MOF at a level determined at year's end according to the needs of theNational Treasury. EGAT's practice is to reflect these remittances as a reduction to retained earningsrather than an income tax because EGAT considers remittances as an appropriation of net income (similarto dividends) rather than a tax on profit. At the middle of the year, the Goverment advises EGAT apreliminary figure to be remitted; EGAT is assessed a final amount to be paid only when its books areclosed. These remittances have been variable ranging from 5% to 20% of net profit. In FY93, MOFdecided to call for a remittance of 30% and EGAT made this contribution in FY94.

B. Present Financial Position

6.7 During FY93, EGAT experienced an increase in energy sales of 11 % over FY92 or from50.8 GWh in FY92 to 56.6 GWh in FY93. Of the 56.6 GWh sales volume, 53% was sold to PEA, 44%to MEA, 3 % to direct customers, and the remainder to EDL (Laos), TNB (Malaysia), and other minorcustomers. Energy sales in FY93 to PEA increased strongly by 14% from FY92, as a result of thegrowing industrial development in provincial areas and the Government's commitment to pursue its ruralelectrification program. The larger share and rapid increase of EGAT's total electricity sales to PEAhad a sharp effect on EGAT's income since the rate of energy sold to PEA was much lower than theaverage sales price to MEA and PEA. According to the new electricity tariff, EGAT's unit sales priceto PEA and MEA further declined; the sales price to PEA in particular, dropped 2% from 97.47stangs/kWh in FY92 to 96.30 stangs/kWh in FY93 (1 Baht = 100 stangs). The lower sales price to PEAcoupled with increasing rate of demand which has surpassed MEA's for several past years resulted in adecrease in the average selling price and consequently, slower growth of EGAT's sales revenues.

6.8 EGAT's operating revenue for FY93 showed an increase of Baht 5.9 billion or 10% overFY92. EGAT's average tariff consists of a basic tariff and an adjustment factor (Ft). The Ft, whichessentially is an adjustment on the basic tariff to account for changes in fuel price, was introduced in June1992 and is applied whenever there is a difference between the actual and target costs of generation ofmore than 2 stangs per kWh. The increase in operating revenues was mainly attributable to the increase

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in electricity demand though offset by a reduction in the basic tariff of about 2.7% from Baht 1.15 inFY92 to Baht 1.12 in FY93. While there was a 22 % rise in the Ft from Baht 0.06/kWh in FY92 to Baht0.08/kWh in FY93, average tariff (including Ft) dropped from Baht 1.22 to Baht 1.20 for the sameperiod. While VAT and land and property tax adjustments were made during the year, some of thesecosts were absorbed by EGAT and not passed on to the consumers. So far, no adjustments have beenmade for demand side management costs (also allowed in Ft) since no significant costs have beenincurred.

6.9 During FY93, total energy generated by EGAT exceeded its budgeted figure but all ofthis excess had to be generated using fuel oil, which is relatively expensive. Hydro generation wasseverely affected by the drought (in certain reservoirs, the water was at its lowest level), and powergenerated by plants using lignite was below budgeted and previous levels mainly due to the environmentalproblems at Mae Moh. Some problems were also experienced with the gas supply from PTT atNamphong which was not as plentiful as originally estimated. These shortfalls had to be made up byplants using fuel oil. As a result, despite falling oil and gas prices, fuel expenses increased from Baht31.9 billion in FY92 to Baht 34.6 billion in FY93, or by 8%.

6.10 Other operating expenses in FY93 increased by 18% from FY92 levels principallybecause of: (a) an increase in expenses of transmission, engineering and generation on account of severalnew plants coming into service; and (b) the full impact of the increase in the salary structure which tookeffect in April 1992. Nevertheless, EGAT posted operating and net incomes of Baht 12 billion and Baht8.1 billion, respectively, for FY93, slightly reduced from those of the previous year of Baht 11.9 billionand Baht 9.1 billion, respectively.

6.11 EGAT's foreign exchange gains and losses on loan repayments arise as a result ofdifferences in exchange rates between year end and at the date of loan repayments. As of September1993, EGAT's long term debts of Baht 117.2 billion (net of current maturities) were denominated halfin US Dollars and the other half in Japanese Yen, German Mark and Swiss Franc. During the year, theBaht weakened against the Dollar and the Yen, but strengthened against the Mark and the Franc. Thelosses on foreign exchange which EGAT charged to its FY93 operations were similar to the previousyear, amounting to Baht 2.1 billion.

6.12 EGAT revalues foreign currency loans as of September 30 of each year, and spreads theloss over the remaining terms of the loans to a deferred foreign exchange adjustment account. Theamount written off to deferred foreign exchange adjustment account increased by approximately 4 % overFY92. Even with the increase in EGAT's long term debt as a result of the inclusion of the deferredforeign exchange account, its debt to equity ratio remained well below the covenanted ratio set inprevious Bank agreements at 60:40.

6.13 EGAT's financial position remained healthy on the strength of continued increases inrevenues accumulated over the years. The self-financing ratio based on a three-year average capitalexpenditures on power, irrigation, mine and development, has been declining from the previous highlevels of FY89-91 because of substantial capital investments which have grown on average at about 39%from Baht 11.8 billion in FY89 to Baht 31.8 billion in FY93. As capital expenditures have grown,EGAT's revalued rate base of net fixed assets for power has also increased from Baht 95.5 billion inFY89 to Baht 184.3 billion in FY93. As a result, the rate of return on revalued rate base has declinedfrom 12% in FY89 to 5.5% in FY93. Other factors also contributed to this trend, particularly in FY92and FY93, when the rate of return had deteriorated to 6.7% and 5.5%, respectively. First, the increase

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in the remittance rate to the Government from 15% to 20% in FY92 and from 20 % to 30% in FY93 hasresulted in significant reductions to operating income. Second, the index used to revalue EGAT's netfixed assets to arrive at the rate base has had a distorting effect. The FY92-93 net fixed assets wererevalued on the basis of very high deflators provided by the Government in February 1992. Subsequentrevisions, however, were made to these deflators in January 1994 which showed lower indices for FY92-93 and consequently, slower increases in EGAT's revalued fixed assets.

C. Financial Outlook

6.14 The healthy financial performance of EGAT is expected to continue for the next severalyears. Projections of EGAT's financial performance for the period FY94-2001 and the assumptionsunderlying these projections are presented in Annex 17. Key financial indicators are presented in Table6.2 below:

Table 6.2: SUMMARY OF EGAT'S FINANCIAL OPERATIONS, FY94-01(Baht million)

Fiscal Year ending 1994 1995 1996 1997 1998 1999 2000 | 2001September 30 l _ l l l I l l

Energy sales (GWh) 63,491 69,971 76,836 83,564 90,638 97,699 105,410 113,853

Average revenue (B/kWh) 1.23 1.32 1.33 1.54 1.58 1.72 1.87 1.92

Operating revenues 79,142 93,175 102,617 128,772 143,314 168,385 197,529 218,849

Operating expenses 63,620 68,968 78,557 86,510 99,630 112,671 121,153 132,998

Operating income 15,522 24,207 24,060 42,262 43,684 55,714 76,376 85,851

Net income 8,982 16,211 15,289 31,663 31,286 34,603 42,617 58,140

Rate base 208,027 233,149 276,591 321,936 347,697 455,201 608,552 668,091

Long-term debt 144,878 183,771 224,797 281,310 341,347 401,656 435,410 478,168

Primary ratios:

Rate of return (%) 5.8 7.1 6.1 8.9 8.9 8.8 9.2 9.1

Debt service coverage (times) 1.5 1.8 1.5 1.7 1.5 1.3 1.2 1.1

Operating ratio (%) 80 74 77 67 70 70 61 61

Current ratio (times) 0.8. 0.6 0.5 0.6 0.4 0.4 0.4 0.3Debt/Equity ratio 0.84 0.60 0.50 0.57 0.42 0.40 0.38 0.32

Self-financing ratio (%) a/ 23 27 25 25 31 25 25 25

a! Internal cash generation less debt service expressed as a percentage of three years' average capitalexpenditure on power, irrigation, mine and development.

6.15 EGAT's capital investment expenditure averaged Baht 17 billion per year in the SixthPlan (FY87-91), and is expected to substantially increase to Baht 50.2 billion in the Seventh Plan (FY92-96), and to Baht 117.2 billion in the Eight Plan (FY97-200 1). About 52% of this expenditure would bein foreign currency. At the same time, EGAT is committed to complying with the Government's policyof keeping public investment under control, encouraging private sector participation in energydevelopment, and conforming with the ceiling on annual public foreign borrowing imposed by the

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Government. EGAT is therefore examining various alternatives to finance this very large investmentprogram and has planned partial divestiture as a fund raising option to meet future capital requirements.

6.16 From 1995 to the year 2001, EGAT's projected foreign currency denominated loan andinterest repayments are projected to increase from Baht 12,700 billion to Baht 55,750 billion. Asensitivity analysis of the projections was done to test the effect of a 5 % fluctuation of the Yen and theMark on EGAT's financials. The results show that even with substantial increases in EGAT's foreigncurrency obligations, the self-financing ratio remains within the 25% ratio agreed with the Bank. Thedebt service coverage ratio will deteriorate but will still remain above 1.0 times (ranging from 1.04 to1.71 times). While EGAT's financial position continues to be strong, the current ratio has been decliningin the past several years, and the decline is projected to continue until 2001. The decline is due to asubstantial increase in current liabilities, including current maturities on account of EGAT's heavyinvestment program. Revised financial projections provided by EGAT at negotiations, show substantiallyimproved results with current ratios exceeding 1.0 times being achieved in the outer years of the forecast(year 2000 and beyond) on account of additional cash and a decline in current maturities expected fromEGAT's sale of a second power plant and the participation of IPPs in its power development plan.

6.17 While EGAT's financial prospects continue to be bright, the challenge for EGAT in thenear term is to be able to finance a high level of capital investments contemplated until 2001 and at thesame time maintain an acceptable level of self-financing to be achieved for the next several years.EGAT's projections show that an acceptable level of self-financing can be achieved from FY95-2001.However, such a level can only be achieved in FY94 if EGAT is able to proceed with the proposed saleof its power plants (para. 1.32). Acceptable levels of self-financing would be sustained if EGATacquires Good State Enterprise (GSE) status and maintains tariffs consistent with its financial objectives.During negotiations, agreement was reached with the Government that it will take measures, includingbut not necessarily limited to setting tariff levels, so as to generate funds from internal sources equivalentto not less than 25% of the annual average of its capital expenditures incurred, or expected to beincurred, for that fiscal year, the previous fiscal year, and the next following fiscal year.

6.18 The projected income statements are based on the assumption that EGAT would be ableto increase tariffs in FY95 by 9% and that the power plant at Rayong would be privatized. It isenvisaged that the fixed assets at Rayong would be transferred to EGCO who would operate the plant andsell power to EGAT. The price at which this power would be sold has not yet been agreed but it isassumed that the price paid by EGAT would be sufficient to provide EGCO with an internal rate ofreturn on equity (IRR) of 20%. It is assumed that the EGCO selling price would be about Baht1. 15/kWh which is higher than EGAT's production cost because EGCO will pay more in capital fundingcosts and insurance premiums and require an IRR of 20%. It is further assumed that EGAT wouldrecover the effect of power purchased from Rayong in the sale price adjustment (Ft) and that the proceedsfrom the sale would be used for other capital investment rather than the repayment of loans whichfinanced the building of the plant. The loans would therefore remain in EGAT's books. It is expectedthat other plants would also be offered for sale to EGCO including Khanom combined cycle plant inFY95.

6.19 Because privatization of the Rayong plant has been delayed, EGAT will operate the plantuntil about end-FY95. Although the delay would not have an appreciable effect on EGAT's incomestatement, a delay in receiving the sale proceeds will have implications on EGAT's capital expenditureprogram and financing. The longer the sale is delayed, the smaller EGAT's other income would become.This is because both interest on the sale proceeds and the EGCO profit from which EGAT takes a share

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would be reduced. EGAT has advised the MOF that unless the proceeds from the sale are forthcoming,it will need to make alternative funding arrangements.

6.20 EGAT's projected financial ratios are expected to be satisfactory. The debt servicecoverage would range between 1.1 to 1.8 times throughout the projected period. The capital structurewould also be more than adequate with long term debts not exceeding 1.3 times equity or a comfortableratio of 57/43. EGAT's current debt control test provides for Bank review of borrowing when the debtto equity ratio exceeds 1.5 times or 60/40 level. To ensure that measures are taken to maintain EGAT'sstrong capital structure, during negotiations, agreement was reached with EGAT that further debts wouldnot be incurred if such additional debt would raise its total long term indebtedness to more than 1.5 timesof its total capitalization. Under previous loans, EGAT was also required not to contract short- andmedium-term debt (debt which matures within five years) in excess of 15% of its total debt outstanding.EGAT has always complied with this covenant, and at negotiations, it was agreed that compliance of thislimit would be continued under the proposed loan.

6.21 The cash flow forecast shows a net outflow of funds of about Baht 86 billion to Baht 262billion throughout the projected period and these will be met largely out of existing cash reserves andborrowings. The forecast includes a source of funds of Baht 17 billion in FY94 on the sale of theRayong plant to EGCO. EGAT's cash flow projections, however, do not show other sources which maymaterialize during the projected period, particularly possible sale of other power plants and investmentsby IPPs (paras. 1.34 - 1.35) sometime in FY98.

D. Lignite Mine Department

Operations

6.22 The Lignite Mining Sector, which is treated as a separate profit center, comprises the MaeMoh and Krabi mines. The Lignite Mine Accounting Division maintains accounting records to enablethe results of the lignite mining operations and the production cost of lignite to be recorded separately.As the electricity tariff is closely linked to fuel costs, the charge to EGAT for lignite is made at aneconomic transfer price which is reviewed annually. The transfer price of lignite is recalculated at thebeginning of the year based on a formula established by consultants, Meta Systems Inc., which has beenagreed with the Bank. The transfer price reflects the long-run marginal cost of lignite and is equal to thesum of EGAT mining costs and a depletion premium that accounts for the increasing economic scarcityvalue of lignite and the associated cost to the economy of the early use of an exhaustible resource. Thedepletion premium is derived from the opportunity cost of lignite (based on imported coal as a substitute),future mining costs and the magnitude of reserves. Agreement was reached during negotiations thatEGAT would continue to set the transfer price for the lignite produced and used in the power plants onthe basis of economic principles and so as to ensure the financial viability of its lignite mine operations,in accordance with the methodology previously agreed with the Bank.

Finances

6.23 In FY93 EGAT raised funds through the issue of EGAT bonds and a loan from theGovernment Savings Bank. Part of these borrowings, amounting to Baht 1.07 billion, were allocated tothe Lignite Mining Sector and are shown on its balance sheet although not all of the funds had been

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utilized by FY93. The Lignite Mining Sector does not have a bank account and accordingly theunutilized funds of Baht 1.02 billion are included in the internal funding account which relatively reducesits equity. This had a significant impact on the debt equity ratio of EGAT; if the surplus funds were heldin the bank account of the Lignite Mining Sector, the debt equity ratio would only be approximately 1:1.

6.24 The financial performance of the Lignite Mining Sector has been satisfactory. It hasconsistently complied with the debt covenants set under previous Bank loans. As of September 1993,its debt:equity ratio is at 1.29:1 and its debt service coverage ratio is at 1.75 times.

E. Tariff Levels and Structure

6.25 EGAT sells power to the distribution utilities, MEA and PEA, at wholesale rates. Theapproach used in setting tariff for end-use consumers of MEA and PEA is on the basis of long-runmarginal cost pricing but takes account of equity, social and developmental considerations. The tariffsensure that sufficient revenues are generated to cover the combined revenue requirement of all the threeutilities, EGAT, MEA and PEA. For rationalization of the bulk supply tariff see para. 4.14 and Annex10.

6.26 According to agreements reached under Loan 2915-TH (Power Transmission Project)concerning adjustments in the then existing tariff structure, a new electricity tariff was announced andtook effect in December 1991. Individual rate categories were reduced from 15 to 8: small residential,large residential, small general service, medium general service, large general service, specific business,government institutions and non-profit organizations, and agricultural pumping. Annex 18 gives thecurrent tariff schedule. An automatic adjustment clause, allowing the utilities to adjust the rates tocomply with changes of costs beyond the utilities' control, was also included in the revised tariff. Theclause allows for adjustment in the price if there are increases/decreases in the costs due to fuel prices,land and property taxes, demand side management, and VAT.

6.27 The differences in cost at various voltage levels are taken into account in determiningindividual tariff rates. Three forms of tariffs are currently being applied: (a) energy charges alone; (b)demand charges with energy charges; and (c) time-of-day (TOD) rates. TOD tariffs for consumers witha demand of greater than 2,000 kW have been in effect since 1991. However, efforts were made tointroduce TOD tariffs to consumers with demand in excess of 30 kW and energy in excess of 355,000kWh per month since December 1992. Implementation of TOD tariffs for medium general serviceconsumers was completed in FY93.

6.28 The electricity tariffs are set by a tariff setting committee composed of EGAT, MEA,PEA, MOF, NEPO and NIDA. The committee meets monthly to determine the automatic adjustmentfactor and prepares recommendations to the NEPC on the proposed tariff increases during the tariffsetting period every three years.

6.29 Table 6.3 below shows the average rate levels in current prices that would be necessaryfor EGAT to achieve an acceptable level of self financing for the next several years.

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Table 6.3: EGAT'S PROJECTED AVERAGE TARIFF

_ Current Level |I FY94 IFY95 IFY96 FY97 IFY98 IFY99 FYOOI 0 I

Average tariff (B/kWh) 1.23 1.32 1.33 1.54 1.58 1.72 1.87 1.92

| Projected tariff increase (%) T - 9.6 0.3 16.1 - 12.1 120 3.0

F. Financing Plan

6.30 The financing plan for EGAT over the FY94-95 period is presented in Table 6.4. Theproposed project, including interest during construction, represents 27% of EGAT's total investmentprogram during the FY94-95 period. The proposed Bank loan of US$100 million is expected to meet10% of EGAT's total financing requirements for the period. During the FY94-95 period, EGAT expectsto meet 21 % of its total capital requirements from internally generated funds. This is lower than 25%(the level required under the self-financing ratio covenant) because the covenant is based on a three-yearaverage investment and EGAT's investments are substantially higher (by 71 %) in FY94-95 than in FY93.EGAT's detailed investment program from FY95 to FY99 is presented in Annex 19. The program showsthat EGAT's required investments including IDC for these five years amount to a total of US$11.4 billionor about US$2.2 billion per year. This figure does not take into account investments in the powersubsector to be made by IPPs. However, the program includes power plants which EGAT will build buteventually sell to EGCO or other subsidiaries. EGAT has in the past been able to raise the requiredfinancing and implement an investment program of this magnitude.

TABLE 6.4: EGAT FINANCING PLAN

lBaht US$ Laht (million) l

Capital Requirements

EGAT Investments 50,971 2,039 94

IDC 3,400 136 6

Total Capital Requirements 54,371 2,175 100

Sources of Funds

Internal Cash Generation 33,177 1,327 61

Less: Debt Service 16,256 650 30

Working Capital Requirements 5,501 220 10

Net Internal Cash Generation 11,420 457 21

Borrowings 25,811 1,032 47

Equity 0 0 0

Sale of Rayong power plant 17,140 686 32

Total Sources of Funds 54,371 2,175 100

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6.31 Borrowing from external sources amount to only 47% of EGAT's financing requirementsfor FY94-95 as a large proportion (32%) of cash sources would be coming from the sale of the Rayongpower plant. EGAT has not experienced any difficulties in the past in securing bilateral financing,suppliers credits, and commercial loans. EGAT has made use of and will continue to use Bank, OECF,and other bilateral funds; export credits; commercial syndicated loans; and local bonds to cover anyfinancing gap.

Chapter VII

Project Justification

A. Economic Analysis

7.1 EGAT's power development plan, which is supported in part by the proposed loan, iscritical to the continued growth and industrialization of Thailand. Its timely implementation is essentialto meeting the growing demands of power by industry, commerce and residential consumers.Economic analyses were performed both for EGAT's investment program and for the Lam TakhongPump Storage project.

EGAT's Investment Program

7.2 To confirm the economic viability of EGAT's power development plan (PDP) theEconomic Rate of Return (ERR) was calculated on the basis of the incremental cost and benefit streamsassociated with the 1991-2000 time-slice of EGAT's overall investment program. This period coversabout 5,500 MW of gas-fired combined cycle plant based on present reserve estimates of domesticnatural gas, about 5,300 MW of conventioned thermal plant (coal/oil/gas), about 1,500 MW of lignite-fired capacity, and about 1,800 MW of peaking hydro, pump storage and gas turbine capacity.Incremental fuel costs are based on economic prices for natural gas, lignite, fuel oil and diesel oil asestimated by NEPO and given in Annex 20. The projected levels of EGAT tariffs producing theminimum covenanted 25% self-financing ratio are used as a proxy for benefits, ignoring possibleconsumer surplus. The ERR on the expansion program is 12%. Details of the calculations are given inAnnex 21.

Lam Takhong Pump Storage Project

7.3 The pump storage units would not only provide the much needed peaking power for theThai grid at least cost, but would considerably improve the system's dynamic performance enabling itto meet rapidly changing loads, while optimizing output from its generators. This benefit is significantbut difficult to quantify and, conservatively, no attempt has been made to do so.

7.4 EGAT has carried out detailed computer simulations of its least-cost development planusing: (a) the 4x250 MW Lam Takhong Pump Storage scheme; and (b) the next best altemative ofinternal combustion turbines of which lIx 100 MW units were required to achieve the same loss of loadprobability as Lam Takhong. These simulations have shown that the pumping energy for Lam Takhongwould be supplied during off-peak hours by the highly efficient dual fuel (oil/gas) 600 MWconventional thermal units in the system. The lignite and coal fired thermal plants and the gas firedcombined cycle plants would be fully committed to supply the system's base load energy. As thereserves of indigenous gas are fully committed, the marginal fuel for both alternatives would be heavyfuel oil. However, as the combustion turbines cannot burn heavy fuel oil, gas is assumed to be divertedfrom the dual fuel (oil/gas) conventional thermal units, which would burn correspondingly higherquantities of heavy fuel oil. If these combustion turbines cannot be installed near locations wherenatural gas supplies are already available, they would have to bum costly diesel oil or the project would

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entail a heavy cost for the extension of gas pipe lines. Conservatively, it is assumed that it would befeasible to instal the combustion turbines near already established gas supplies.

7.5 The overall efficiency of the pump storage scheme which includes transmission lossesduring pumping is estimated at 70%. Thus for an annual energy generation of 989 Gwh from the pumpstorage plant, the pumping energy requirement is 1,412 Gwh. The heat rates of the large conventionalthermal units are: 9.04 cft/kWh for gas and 0.23 I/kWh for heavy fuel oil. The heat rates for thecombustion turbines are 11.62 cft/kWh for gas and 0.33 1/kWh for diesel oil.

7.6 Investment costs of the pump storage scheme and the next best alternative of internalcombustion turbines are based on constant 1994 prices, exclusive of duties and taxes and interest duringconstruction (Annex 22). The cost of environmental impact mitigation and compensation (tomaintain/increase the standard of livelihood of the affected people) are fully considered for LamTakhong. Operation and maintenance costs are assumed at 1.0%, 3.0%, and 1.5%, respectively, of thecapital costs for hydro plant, internal combustion turbines and transmission system. The economic livesof the facilities are assumed as: (a) internal combustion turbines - 20 years; (b) hydro-electricmachinery - 20 years; (c) civil works - 50 years; and (c) transmission system - 33 years. Theincremental quantity of fuel oil for the pump storage scheme as compared to internal combustionturbines is derived from actual simulation of the system operation.

7.7 Details of the economic analysis for the base case are presented in Annex 23. Theequalizing discount rate (at which the present values of the cost and benefit streams become equal), iscomputed at 16%. This is above the threshold discount rate of 10% stipulated by NESDB for projectacceptability. Sensitivity analysis for variation in various relevant parameters gives the following valuesfor the equalizing discount rate. This shows that the project continues to remain economically viableunder possible, though unlikely, adverse conditions.

Case ERR

Base 16%

Capital cost of Lam Takhongincreased by 10% 13%

Price of fuel oil escalatedat 3% p.a. for the entireproject life 15%

Combustion turbines using dieseloil instead of gas 20%

B. Risks

7.8 The project faces risks generally associated with any hydro project - cost and scheduleoverruns due to geological and hydrological uncertainties, and contractor and construction supervision

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inadequacies. Geological risk is small due to the uniform nature of the site geology and has beenfurther lessened by very comprehensive site testing and investigations. Hydrological uncertainties arelow since hydrology of the Lam Takhong River has been well established and the project actuallyconsumes no water. Flood risk is low since the small amount of work needed in the reservoir would becarried out in the dry season, and sudden rises in the reservoir water level could be prevented byoperation of the outlet works. Care has been taken in the perqualification process to ensure a fullyqualified contractor and the full involvement of experienced international consultants in constructionsupervision would reduce the project management risks to a minimum. Finally, EGAT's excellent trackrecord in overall management of hydro projects and its state of preparedness gives a substantial degreeof assurance for timely completion of the project.

Chapter VIII

Agreements Reached and Recommendation

A. Agreements

8.1 During negotiations, agreement was reached:

With EGAT that it would:

(a) carry out an annual review and update of its 5-year investment program and relatedfinancing plan and exchange views with the Bank and the Government on the saidprogram (para. 2.8);

(b) submit to the Bank audited annual financial statements for the mining operations andEGAT as a whole, within six months of the close of each fiscal year (para. 3.21);

(c) under arrangements satisfactory to the Bank, cause the upper reservoir dam to beperiodically inspected in accordance with sound engineering practice in order todetermine whether there are any deficiencies in the condition of this structure, or in thequality and adequacy of maintenance or methods of operations of the same, which mayendanger its safety (para. 4.18);

(d) carry out the Environmental Impact Mitigation and Rehabilitation Plans as set forth inthe documents: (i) Implementation Plan - Environmental Mitigation and Development,January 1994, by OEPP; and (ii) August 1994, Addendum to the Implementation Plan,Environmental Mitigation and Development, by EGAT, including provision ofnecessary budget, appointment of committees for managing and supervisingimplementation and agencies for monitoring and evaluation (para. 5.1);

(e) construct the Phase II transmission lines only after the environmental investigationreports and necessary mitigation measures have been approved by OEPP and reviewedby the Bank (para 5.23);

(f) maintain a debt/equity ratio not exceeding 60:40 and short- and medium-term debt at nomore than 15% of all debt outstanding (para. 6.20);

(g) continue to operate its lignite mining activities as separate profit center by maintainingseparate accounts and financial statements; set the transfer price of lignite produced andused on the basis of appropriate economic and financial criteria in accordance withmethodology previously agreed with the Bank (para. 6.22).

With EGAT and the Government that:

EGAT would undertake a study for the rationalization of the bulk supply tariff,according to terms of reference agreed with the Bank, and promptly thereafter, the

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Government will review with the Bank the recommendations of that study andimplement the said recommendations taking into account the Bank's views (para. 4.14).

With the Government that it would:

undertake a periodic review of power rates to ensure that tariffs are adequate for EGATto produce funds from internal sources equivalent to not less than 25 % of the annualaverage of its capital expenditures incurred, or expected to be incurred, by them forthat fiscal year, the previous fiscal year, and the next following fiscal year (para. 6.17).

B. Recommendation

8.2 On the basis of the agreements outlined above, the proposed project is suitable for aBank loan of US$100 million equivalent to EGAT with the guarantee of the Kingdom of Thailand at theBank's standard variable interest rate for a 17-year term including a 5-year grace period on repaymentof principal.

ANNEXES

-57- Annex 1

THAILAND

Lam Takhong Pump Storage Project

Highlights of EGAT, MEA and PEA Operations

FY89 FY90 FY91 FY92 FY93

EGAT

Peak generation (MW) 6,233 7,094 8,045 8,877 9,730

Annual load factor (%) 66.8 69.5 69.9 72.0 73.0

Net energy generation (GWh) 36,457 43,189 49,225 56,006 62,180

Energy sold (GWh) 33,611 39,369 44,773 50,771 56,558

Network losses (GWh) 2,846 3,820 4,452 5,235 5,622

Network losses (as % of generation) 7.81 8.84 9.04 9.35 9.04

Number of employees 31,797 33,153 34,990 35,200 35,200

Employee per MW installed 4.6 4.1 3.6 3.2 2.9

MEA

Peak demand (MW) 2,715 3,124 3,519 3,993 4,346

Energy purchased (GWh) 16,144 18,623 20,777 22,956 24,873

Energy sold (GWh) 15,247 17,725 19,851 21,968 23,849

Losses (GWh) 897 898 926 988 1,024

Losses (as % of purchases) 5.6 4.8 4.5 4.3 4.1

Number of Consumers ('000) 1,190 1,273 1,377 1,497 1,604

Sales/consumer (kWh) 12,817 13,923 14,416 14,675 14,868

Annual load factor (%) 67.9 68.1 67.4 65.6 65.3

Number of employees 11,764 12,969 13,887 13,916 13,617

Number of consumers/employee 101 98 99 108 118

PEA

Peak demand (MW) 3,266 3,763 4,284 4,984 5,709

Energy purchased (GWh) 16,161 19,352 22,531 26,178 29,918

Energy generated (GWh) 17 17 20 20 25

Energy available (GWh) 16,178 19,369 22,551 26,198 29,943

Energy sold (GWh) 14,930 17,932 20,954 24,359 28,819

Losses (GWh) 1,248 1,437 1,597 1,659 1,124

Losses (as % of available) 7.7 7.4 7.1 6.3 3.8

Number of Consumers ('000) 6,069 6,586 7,082 7,547 8,047

Sales/consumer (kWh) 2,460 2,723 2,959 3,251 3,581

Annual load factor (%) 56.6 58.8 60.1 60.0 59.9

Number of employees 26,116 27,380 28,641 29,814 30,884

Number of consumers/employee 232 241 404 395 384

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Annex 2Page 1 of 2

THAILAND

Lam Takhong Pump Storage Project

Demand-Side Management Program

Background

1. In 1992, the Government of Thailand (GOT) approved legislation establishing the EnergyConservation Promotion Act, which increased the GOT commitment and resources to implement acomprehensive energy efficiency program. In 1993, the Global Environmental Facility (GEF) provideda grant to fund the Thailand Promotion of Electricity Efficiency Project (GEF Project). The objectiveof the GEF Project is to demonstrate on a large scale and within a reasonable timeframe (a) the potentialfor electricity savings to replace substantial future power generation in Thailand, thereby reducing futureCO2 (and nitrogen oxide and sulfur dioxide) emissions, and (b) the capability of the electric power sectorand other relevant agencies to achieve projected savings. The GEF Project is funding a slice of theGOT's Five-Year (1993-1997) US$189 million Demand-Side Management Plan (DSMP) and has as itsprimary focus the demonstration of specific energy efficient technologies in the residential, commercialand industrial sectors to achieve the required energy savings over the Project period.

2. The DSMP has a savings target of 238 MW and 1,427 GWh of electricity per annum bythe end of 1997. The Project has a four-pronged approach: (a) provision of user and manufacturerincentives and consumer education to direct practices and attitudes toward energy efficient technologies;(b) development of efficiency standards and testing capabilities to exercise control and monitor efficiencyimprovements; (c) development and promulgation of building and appliance codes to allow for theenforcement of minimum standards; and (d) continued pursuit of technological improvements andadaptation to Thai conditions.

3. The aforementioned DSMP is being implemented by the Electricity Generating Authorityof Thailand (EGAT), which has the legal mandate and the authority to pursue all facets of acquiringelectricity DSM resources. Within EGAT, DSM program implementation is the responsibility of theDSM Office (DSMO), with a current staffing level of 60 people.

Demand-Side Management Implementation

4. The DSMP includes programs for three main segments of the market - the residential,commercial and industrial sectors. The Residential programs focus on both manufacturers andconsumers: incentives to manufacturers to stimulate the production and supply of energy efficientequipment and to customers to encourage the purchase of more efficient equipment. All programs arein the design phase or early stage of implementation.

5. The Lighting Program. The primary focus of the lighting program to date has been topromote high efficiency fluorescent tubes (36 watt and 18 watt) to replace standard fluorescent tubes (40watt and 20 watt). Since more than 40 million fluorescent tubes are sold each year in Thailand,

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Annex 2Page 2 of 2

approximately 100 MW peak demand reduction is projected from this program by 1997. EGAT alreadyreached an agreement with 5 major lighting equipment manufacturers in Thailand to stop the productionof standard tubes by September 1995. The five lighting equipment manufacturers represent a combinedmarket share of 95 percent. In addition, a program to offer incentives to encourage the consumption andthe production of low-loss magnetic ballasts is under development.

6. The Refrigerator/Air Conditioner Rebate Program. Beginning January 1, 1995, eachrefrigerator (size 5-6 cu. ft.) sold will have a label indicating an efficiency rating, level of annual KWhuse, and cost of electricity consumption. This pilot program will provide to the purchasers of highefficiency refrigerators a coupon that is redeemable for a cash rebate by sending it to EGAT. The rebateis expected to cover a part of the incremental cost of high efficiency refrigerators. Peak demand savingsof 27 MW and energy savings of 186 GWh per annum are anticipated from this program by the end of1997. A similar program for air conditioner is envisaged for implementation in early 1995. In the latterphase of the five-year program, incentives will be replaced by standards and codes that will establish andenforce minimum levels of efficiencies for equipment.

7. In the Commercial sector, the program component aims to influence existing commercialand governmental establishments to retrofit/replace existing lighting systems with more efficient systems,by offering free lighting audits and rebates for lighting component and system replacement and retrofit.To date, lighting retrofits have been performed in eight public buildings. In addition, EGAT haslaunched an energy audit program targeted specifically for department stores. There exist approximately80 large department stores in Bangkok, and seven of them participated in the energy audits to date.EGAT is also planning to expand the program to hotels and hospitals.

8. Another commercial program, in an early planning stage, is a new commercial buildingsprogram which would provide incentives for the design of energy efficient buildings. Improvements inbuilding design will be achieved through the provision of design services and training for architects andengineers; the payment of some portion of the incremental cost of more energy efficient systems forpioneering pilot programs; and the ultimate phasing out of such incentives over time through developmentand promulgation of building codes to establish maximum levels of building energy usage.

9. There are two program components planned for the Industrial sector. The first, the MotorSystem Program, to be administered by the DSMO, will focus on improving the efficiency of existingand new motors systems. The second, the Process Efficiency Program, to be administered by theDepartment of Energy Development and Promotion (DEDP), will focus on the improvement of energyefficiency of overall industrial processes. The Motor System Program will provide rebates to purchasersof new motors to move to higher efficiency motors and will also provide rebates to motor users to replacebumt-out motors with high efficiency motors instead of rewinding. Over time, the Motor SystemsProgram will provide free audits (coordinated with the DEDP) and incentives to encourage replacement.In addition, various administrative mechanisms will be implemented, such as the establishment of codesof practice and certification of motor rewinders and the reduction of tariffs on the importation of highefficiency motors and inverters.

Annex 3Page 1 of 2

THAILAND

Lam Takhong Pump Storage Project

A. Power Subsector Privatization Plan

Activity Status Target Date

First Step:1. Acquire GSE Status Protracted discussions continue. 06/95.

2. Change bulk price Monenco consultants hired to design bulk power agreement NEPO reviewing.to MEA/PEA to LRMC with MEA/PEA. Report finished in 1993. PEA opposing

recommendations.

3. Introduce business Substantial progress made. Agreement heavy oil w/ PTT com- 6/95.principles in fuel pleted ('93); natural gas agreement to be completed in 6/95.

4. Automatic tariff Completed.adjustment.

5. Distribution of Completed.EGCO shares to SET.

6. Elimination of To be considered before privatization. FY95.uniform tariff.

Second Step:1. Sale of Rayong Completed.

power plant.

2. Raise private Consultant has been hired to prepare proposal and 6/95.sector funds for evaluation documents. EGAT to review recommendations.Mae Kham. On schedule for inviting IPPs.

3. Determine IPP Consultant has been retained for IPP program.functions. Report is done & EGAT has reviewed recommendations.

4. EGAT restructuring. Being implemented. Deferred implementation until 10/95.IM is in place.

5. MEAIPEA GSE status. Currently underway. FY95.

6. Restructure PEA. Currently underway. FY95.

Third Stet:1. Amend EGAT Act & privatize Delayed. FY97.

EGAT, MEA & PEA.

2. Prepare EGAT registration Delayed. FY97.with SET.

3. Encourage IPP investment Guidelines already issued. --

Fourth Steo:1. Diversify PEA. Not yet done. FY98.

2. Distribute shares of EGAT, Listing to be done. FY98.MEA, PEA in SET.

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Page 2 of 2

B. Electricity Generating Company (EGCO)

1. EGCO is a private company set up under the commercial code, and registered with the Ministryof Commnerce on May 15, 1992 with an initial registered capital of Baht 100 million divided into 10 millionshares. At the moment, EGAT holds the entire equity with the exception of 15 shares to comply with SETregulations for public listing. After the initial public offering, EGAT shall control 48% of EGCO with theremaining shares held by Crown Property Bureau and other equity investors, which would include retail andinstitutional investors. It is intended that EGCO would operate at full arms length from EGAT and wouldhave full responsibility for its operations.

2. After the establishment of EGCO, the Government, in September 1992, took additional steps toensure the success of the privatization program by initially giving EGCO an option to acquire the Khanompower facility that consists of a 674 MW nearly-completed combined cycle station, and two other existing 75MW barge-mounted thermal power stations located in Southern Thailand. Secondly, the Government grantedEGCO the rights to invest in businesses related to the power industry and to bid for other independent powerprojects.

3. In February 1994, the Cabinet gave its approval in principle to the key project agreements andstructure of EGCO. EGCO is to be organized as a holding company; it will not become the direct owner ofspecific power plants, rather, holdings will be set up for the assets of each power plant. EGCO will hold99.9% of the shares in newly-set up subsidiaries and any business contracts will be made directly by thatsubsidiary. It is envisaged that the holding company structure will allow EGCO to expand to other futureprojects while at the same time allow each project to be financed individually on a project finance basis.Following this decision, the Rayong Electricity Generating Company (REGCO) was established in June 1994as EGCO's first wholly-owned subsidiary. In line with the recommendations of the EGCO study, EGCO haspurchased the Rayong power plant and associated assets, partly in exchange for shares and partly on loanaccount. When the transfer of the Rayong Plant is concluded, EGCO's shares will be offered to privateinvestors and as EGCO takes on other projects, further tranches of shares will be sold to the public, withEGAT always maintaining 48% ownership of EGCO's equity. In April 1994, the Cabinet gave its assent tothe transfer price of the sale of the Rayong power plant to EGCO. EGCO has now applied for SET listing,has appointed a new managing director and two deputies, and is fully operating from its office in Bangkok.

4. EGCO is currently negotiating three key project agreements which will define its contractualrelationships with EGAT as well as the conduct of its future operations. First, it has signed an Asset PurchaseAgreement, which outlines the assets and the price at which EGAT has agreed to sell them, and includesterms of the transfer of title of the Rayong power plant to REGCO and the option for EGCO to purchase theKhanom power station. Second, it is finalizing a Power Purchase Agreement, which is the most important ofthe three key agreements since it defines the revenue stream that REGCO is to receive from EGAT in the next20 years, and since the Agreement will be used by EGAT as a model for future IPP projects. The mainfeatures of this Agreement include: (a) EGAT's commitment to take all of the output from the power plants;(b) the initial 20 year term with options to extend subject to mutual agreement; (c) the electricity sales pricecomprising of a demand and energy charge; (d) a bonus and penalty scheme providing incentives for highlevels of power station availability and efficient usage of fuel; (e) interim fuel supply arrangements; and (f)governmental force majeure events. Finally, it is negotiating the terms of a six-year renewable MajorMaintenance Agreement wherein EGAT has agreed to perform major maintenance, repairs, administrative andadditional services in exchange for service fees.

THAILAND

Lam Takhong Pump Storage Project

Demand Forecast

FY 94 FY 95 FY 96 FY 97 FY 98 FY99 FY 00 FY01

Energy Sales (GWh)MEA

Residential 4,985 5.300 5.720 6,114 6,552 7.037 7,572 8.150

Business 9,389 10,708 12,081 13,335 14,611 15,970 17,351 18,821

Industrial 10,317 10.999 11,832 12,628 13,449 14.312 15,226 16,357

Specific 420 436 454 474 495 519 545 576

Water Supply 325 341 359 378 398 418 438 460

Government 101 1,052 1.091 1.134 1.177 1,221 1.264 1,307

Street lighting 109 114 119 124 128 133 138 143

Received from EGAT 27,879 30,387 33.226 35,881 38.632 41.573 44,644 48.085

PEAResidential 7.419 8.324 9,344 10,171 11.081 12,086 13,196 14.425

Business 5,348 5,876 6,409 6,947 7.498 8.061 8,638 9,229 cb

Industrial 15,334 17,158 19,102 21,155 23,303 25.598 28,006 30,528

Specific 965 1,054 1,143 1,235 1,328 1.424 1,522 1,624

Gov. & Npo 1,332 1,419 1,504 1,587 1,669 1,749 1,829 1,909

Agri. pumping 150 166 180 194 208 222 236 251

Temporary 396 437 477 517 558 599 639 678

Free of charge 195 213 232 252 273 294 316 339

Received from EGAT 33,208 36,931 40,908 44,799 48,894 53,265 57,883 62,768

EGAT's direct customers 2,404 2,652 2,703 2,883 3,111 2,862 2,882 3,000

Total Sales 63,491 69,970 76,837 83,563 90,647 97,700 105,409 113,853

EGAT network losses (GWh) 5,917 6,417 7,060 7,615 8,696 9,192 9,726 10,305

As % of net generation 8.5 8.4 8.4 8.4 8.8 8.6 8.4 8.3

EGAT net generation (GWh) 69,407 76,388 83,896 91,178 99,334 106,891 115,136 124,158

EGAT load factor (%) 72.2 72.7 73.1 73.3 74.0 74.2 74.3 74.5

EGAT peak generation (MW) 10,975 11,993 13,103 14,193 15,315 16,446 17,685 19,029

MEA peak demand (MW) 4,791 5,231 5,723 6,205 6,670 7,174 7,701 8,290

MEA load factor (%) 66.4 66.3 66.3 66 66.1 66.2 66.2 66.2

PEA peak demand (MW) 6,186 6,803 7,460 8,090 8,752 9,459 10,205 10,995

PEA load factor (%) 61.4 62.1 62.7 63.3 63.9 64.4 64.8 65.3

Energy requirement of pumped 330 330 452 512 1,083 1,083 1,083 1,083

storage Hydro Power Plantx

-63- Annex 5THAILAND

Lam Takhong Pump Storage ProjectEGAT's Existing Generating Capacity

(as of September 1994)

Average EnergyPlant Type Commissioning No. of Cavacity (MW) Capability

Date(s) Units Installed Ultimate (GWh/Yr)

Hydroelectric PlantBhumibol 1964-82 7 547.6 715.6 1,118.0Sirikit 1974 3 375.0 500.0 670.0Ubolratna 1966-68 3 25.2 25.2 56.0Sirindhom 1971-84 3 36.0 36.0 86.0Chulabhorn 1972 2 40.0 40.0 95.0Kaeng Krachan 1974 1 17.5 17.5 78.0Nam Pung 1965 2 6.0 6.0 15.0Srinagarind 1980-85 5 720.0 720.0 1,283.0Bang Lang 1981 3 72.0 72.0 200.0Tha Thung Na 1981-82 2 38.0 38.0 165.0Khao Laem 1984-85 3 300.0 300.0 460.0Huai Kum 1982 1 1.06 1.06 2.0Ban Yang 1974 3 0.13 0.13 0.3Ban Santi 1982 1 1.27 1.27 6.0Ban Chong Klum 1984 1 0.02 0.02 0.1Ban Khun Klang 1983 2 0.18 0.18 0.4Maengat 1985 2 9.0 9.0 29.0Kiridham 1986 2 12.7 12.7 27.0Rajiaprabha 1986-87 3 240.0 240.0 350.0Huai Kui Mang 1987 1 0.1 0.1 0.2Pak Mun 1994 2 68.0 136.0 251.0

Total 52 2,509.76 2,870.76 4.892.0

Thermal Power PlantMae Moh (Lignite) 1978-91 11 2,025.0 2,025.0 13,310.0Krabi (Lignite) 1964-68 2 34.0 34.0 180.0North Bangkok (Oil) 1961-68 3 237.5 237.5 1,250.0Surat Thani (Oil) 1973 1 25.0 25.0 170.0Khanom PPB (Oil) 1981-89 2 150.0 150.0 1,050.0South Bangkok (Oil/Gas) 1970-77 5 1,330.0 1,330.0 9,320.0Bang Pakong (Oil/Gas) 1983-92 4 2,300.0 2,300.0 16,118.0

Total 28 6.101.50 6.101.50 41.398.0

Combined Cycle Power Plant (Gas)Bang Pakong 1980-92 16 1,374.6 1,374.6 9,633.0Rayong 1990-93 12 1,232.0 1,232.0 8,634.0Khanom 1994 5 674.0 674.0 4,723.0Nam Phong 1990-93 6 710.0 710.0 4,975.0South Bangkok 1994 3 335.0 335.0 2,348.0

Total 42 4,325. 4,325.60 30.313.

Gas Turbine (Distillate)Udon Thani 1969 1 14.0 14.0 31.0Hatyai 1969-71 3 42.0 42.0 92.0Surat Thani 1969-70 2 28.0 28.0 62.0Lan Krabu 1969-81 8 140.0 140.0 858.0

Total 14 224.0 224.0 1.043.0

Grand Total 13.16.86 13. 160.86..

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Annex 6

THAILAND

Lam Takhong Pump Storage Project

EGAT's Existing Transmission and Substation Facilities

Substation Transmission LinesRegion (Circuit-Kilometers)

and System Number Transformer a/ Double- | Single- TotalVoltage Capacity (MVA) Circuit Circuit

Region 1500 kV 1 1,200 26 132 158230 kV 23 11,627 3,271 42 3,313115 kV 48 3,644 784 1,488 2,27269 kV 2 59 0 66 66

Total 74 16,530 4,081 1,728 5,809

Region 2230 kV 5 1,600 802 0 802115 kV 30 2,018 2,496 1,674 4,17069 kV 4 66 0 145 145

Total 39 3,684 3,298 1,819 5,117

Region 3230 kV 6 1,100 1,274 0 1,274115 kV 19 1,562 1,268 1,137 2,405

Total 25 2,662 2,542 1,137 3,679

Region 4500 kV 2 1,800 668 375 1,043230 kV 6 1,283 2,178 218 2,396115 kV 25 1,632 1,023 1,157 2,18069 kV 2 66 0 29 29

Total 35 4,781 3,869 1,779 5,648

All Regions500 kV 3 3,000 694 507 1,201230 kV 40 15,610 7,525 260 7,785115 kV 122 8,856 5,571 5,456 11,02769 kV 8 191 0 240 240

Total EGAT J 173 | 27,657 | 13,790 1 6,463 20,253

Notes: a/ Station service and generator unit transformers are excluded.

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Annex 7Page 1 of 2

THAILAND

Lam Takhong Pump Storage Project

Power Development Plan

Location Unit No. Type Capacity (MW) Scheduled date

Under ConstructionKhanom CC 1 (GT) 1-4 Gas 448 November 1993Nam Phong CC 2 (ST) 1 113 May 1994Pak Mun 1-4 Hydro 136 June 94 - Nov 94South Bangkok CC 1 (ST) I 115 August 1994Khanom CC 1 (ST) 1 226 September 1994Sirikit 4 Hydro 125 March 1995Mae Moh 12 Lignite 300 May 1995Mae Moh 13 Lignite 300 November 1995Bhumibol Pumped-Storage 8 Hydro 175 December 1995Kaeng Krung 1-2 Hydro 80 September 1999

Sub-total 2.018

New ProjectsNong Chok Gas Turbine 1 Diesel 100 January 1995Nong Chok Gas Turbine 2 Diesel 100 February 1995Nong Chok Gas Turbine 3 Diesel 100 March 1995Nong Chok Gas Turbine 4 Diesel 100 April 1995Sai Noi Gas Turbine I Diesel 100 May 1995Sai Noi Gas Turbine 2 Diesel 100 June 1995Wang Noi CC 1 (GT) 1-2 Gas 200 December 1995Wang Noi CC 2 (GT) 1-2 Gas 200 February 1996Wang Noi CC 3 (GT) 1-2 Gas 200 April 1996South Bangkok CC 2 (GT) 1-2 Gas 400 May 1996Wang Noi CC 4 (GT) 1-2 Gas 200 June 1996Bang Pakong Combined Cycle 5 (GT) a/ 1-2 Gas 400 June 1996Wang Noi CC I (ST) I - 100 December 1996Wang Noi CC 2 (ST) I - 100 February 1997South Bangkok CC 2 (ST) I - 200 February 1997Bang Pakong Combined Cycle 5 (ST) a/ I - 200 March 1997Wang Noi CC 3 (ST) I - 100 April 1997EGAT-TNB Stage H Interconnection - - 300 April 1997Wang Noi CC 4 (ST) I - 100 June 1997Ao Phai Thermal I Oil/Coal 700 October 1998Mae Kham FBC I Lignite 300 November 1998Lam Takhong Pumped-Storage 1-2 Hydro 500 January 1999Ao Phai Thermal 2 Oil/Coal 700 April 1999New Thermal 1 Oil/Coal 1,000 July 1999Ao Phai Thermal 3 Oil/Coal 700 October 1999

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Annex 7Page 2 of 2

Location Unit No. Type Capacity (MW) Scheduled date

New Thermal 2 Oil/Coal 1,000 July 2000Region 3 Combined Cycle I Gas 300 October 2000Mae Taeng 1-2 Hydro 26 October 2000Lampang I Lignite 300 November 2001Lam Takhong Pumped-Storage 3-4 Hydro 500 February 2002Lampang 2 Lignite 300 March 2002Mae Lama Luang 1-2 Hydro 160 April 2002Lampang 3 Lignite 300 July 2002Region 3 Combined Cycle 2 Gas 300 November 2002Lampang 4 Lignite 300 November 2002New Thermal 3 Oil/Coal 1,000 January 2003Lampang 5 Lignite 300 March 2003Nam Khek Pumped-Storage 1-2 Hydro 300 April 2003Lampang 6 Lignite 300 July 2003New Thermal 4 Oil/Coal 1,000 January 2004New Thermal 5 Oil/Coal 1,000 July 2004Lampang 7 Lignite 300 January 2005New Thermal 6 Oil/Coal 1,000 January 2005Lampang 8 Lignite 300 July 2005New Power Plant I Oil/Coal/LNG/Nuclear 1,000 January 2006New Power Plant 2 Oil/Coal/LNG/Nuclear 1,000 July 2006

Sub-total 18.186

Total

a! Siting will be changed to Wang Noi for combined cycle Blocks 5-6 rated 300 MW each.

-67-

Annex 8

THAILAND

Lam Takhong Pump Storage Project

Balance of System Load Requirements and Capabilities

Requirement Capacity EneriryFiscal Peak Energy Reserve CaDacity ReserveYear Generation Generation InstaUed Dependable Gross a/ Net b/ Firm from Firm

(MW) (GWh) (MW) (MW) (M) (*) (GWh) (*)

1984 3,547.3 21,066.4 5,898.6 5,666.3 59.74 33.50 27,427.8 30.201985 3,878.4 23,356.7 5,898.6 5,666.3 46.10 35.69 30,838.8 32.031986 4,180.9 24,779.5 6,507.6 6,228.6 48.98 25.87 32,034.8 29.281987 4,733.9 28,194.3 6,634.0 6,368.3 34.53 15.68 33,001.4 17.051988 5,444.0 31,997.0 6,886.7 6,578.5 20.84 0.60 33,246.8 3.911989 6,232.7 36,277.2 7,261.7 6,946.0 11.44 -6.24 34,746.4 -4.221990 7,093.7 43,188.8 7,977.7 7,647.6 7.81 -7.73 37,932.7 -12.171991 8,045.0 49,347.4 9,617.7 9,078.8 12.85 1.39 47,458.8 -3.831992 8,876.9 56,006.0 11,040.7 10,472.8 17.98 7.04 56,112.3 0.191993 9,730.0 62,179.7 12,190.7 11,602.5 19.24 8.74 66,141.5 6.371994 10,800.0 69,765.0 13,160.9 12,182.3 12.80 6.34 70,915.8 1.651995 11,880.0 76,890.0 14,149.9 13,238.4 11.43 5.34 74,890.3 -2.601996 13,009.0 83,896.0 16,017.9 15,039.6 15.61 11.75 82,738.3 -1.381997 14,193.0 91,178.0 17,217.9 16,221.6 14.29 10.07 93,205.2 2.221998 15,315.0 98,763.0 17,292.9 16,295.8 6.40 2.00 97,166.1 -1.621999 16,446.0 106,673.0 20,572.9 19,474.8 18.42 11.15 108,395.2 1.612000 17,685.0 115,742.0 22,012.9 20,869.8 18.01 10.96 123,088.1 6.352001 19,029.0 124,999.0 22,138.9 20,993.8 10.33 4.81 128,942.2 3.152002 20,237.0 133,171.0 23,698.9 22,535.8 11.36 6.17 131,827.3 -1.012003 21,440.0 141,862.0 26,198.9 24,981.8 16.52 9.33 145,073.1 2.262004 22,690.0 150,889.0 27,888.9 26,618.1 17.31 8.54 155,963.4 3.362005 23,997.0 160,274.0 29,178.9 27,872.3 16.15 9.12 167,245.9 4.352006 25,371.0 170,151.0 30,718.6 29,391.6 15.85 10.90 175,248.6 3.00

Notes: a/ Dependable capacity minus peak demand.b/ Firm capacity minus peak generation.

-68-Annex 9

THAILAND

Lam Takhong Pump Storage Project

Projected Energy Balance

Types of Units Fiscal YearPower Plant 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

1. Hydro GWh 2986 2403 3785 4380 4380 4380 4558 4670 4941 5212 5212 5212-Pumping GWh 472 504 316 358 358 728 853 852 1183 1429 1429 1511- Total Hydro GWh 3458 2907 4081 4738 4738 5108 5411 5523 6124 5541 5541 5723

% 5.0 3.8 4.9 5.2 4.8 4.8 4.7 4.4 4.6 4.7 4.7 4.2

2. Natural Gas GWh 31771 33969 30464 45152 48331 45959 51840 55419 58859 58371 57811 57365(Domestic) % 45.5 44.2 36.3 49.5 48.9 43.9 45.0 44.4 42.5 41.1 38.3 35.8

MMSCFD 853 857 748 1052 1055 1021 1142 1217 1248 1282 1268 1257

3. Natural Gas GWh - - - - - - - - - - - -(Imported) %

MMSCFD - - - - - - -

4. Heavy Oil GWh 20468 22522 27497 21878 25223 33448 13035 13581 15620 11378 9498 4955% 29.3 29.3 32.8 24.0 25.5 31.3 11.3 10.9 11.7 8.0 6.3 3.1

10 litres 5090 5578 6791 5321 8199 7946 3166 3324 3883 2780 2316 1231

5. Diesel Oil GWh 354 1864 3692 320 1381 320 320 320 1172 320 320 320% 0.5 2.4 4.4 0.4 1.4 0.3 0.3 0.3 0.9 0.2 0.2 0.2

10 litres 247 601 1121 116 456 120 123 123 402 130 132 136

6. Lignite GWh 12956 14406 17402 18385 18386 20310 20485 20485 24160 30460 33085 36185% 18.6 18.7 20.7 20.2 18.6 19.0 17.8 16.4 18.1 21.5 21.9 22.0

10 Tons 10850 12360 15870 16469 16459 18227 18388 18388 21594 27091 29382 31214

7. Import Coal GWh - - - - - - 23475 28731 28731 33987 42747 550119% - - - - - - 20.4 23.0 21.6 24.0 28.3 34.3

10 Tons - - - - - - 7992 9770 9770 11547 14510 18657

8. Nuclear GWh - - - - - - - - - - - -

Tons - - - - - - - - - - - -

9. Purchase GWh 760 1222 760 705 705 705 705 705 705 705 705 705% 1.1 1.6 0.9 0.8 0.7 0.7 0.6 0.6 0.5 0.5 0.5 0.4

Total GWh 69765 76890 83896 91178 98763 106850 115271 124764 133171 141862 150889 160274% 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

MMSCFD = Million Standard Cubic Feet Per Day.

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Annex 10Page 1 of 2

THAILAND

Lam Takhong Pump Storage Project

Rationalization of Bulk Supply Tariff to MEA and PEAConsulting Study - Terms of Reference

Background

1. Electricity supply in Thailand is undertaken by three utilities: (a) the Electricity GeneratingAuthority of Thailand (EGAT) which is responsible for generation and transmission of electricity in thewhole country and distribution to a few large consumers; (b) the Metropolitan Electricity Authority(MEA) which is responsible for distribution of power to metropolitan Bangkok area, Nonthaburi andSamut Prakan; and (c) the Provincial Electricity Authority (PEA) which is responsible for thedistribution of electricity to the rest of the country.

2. MEA and PEA receive power from EGAT in bulk at several of their grid substations.The bulk supply tariff to MEA and PEA as currently applied comprises a flat energy charge. Withouta demand charge or a variation depending on time of use, the tariff does not reflect the costs of supply,and is, therefore inadequate to give correct signals to the distribution utilities to improve their loadfactor, load shape and power factor or foster energy conservation. The bulk supply tariffs to MEA andPEA are set by the Government, taking into account the financial needs of the three utilities. Thecurrent tariff for bulk supply to MEA is 1.47 Baht/kwh, whereas the tariff to PEA is 0.96 Baht/kwh,although the actual cost of supply to PEA is greater than the cost of supply to MEA. The difference inthe tariff to the two utilities MEA and PEA is intentional, so that the urban consumers subsidize therural consumers, the retail tariff for all consumers in Thailand being uniform.

3. The Government of Thailand has drawn up a plan for the commercialization andcorporatization and eventual privatization of EGAT, MEA and PEA. EGAT may be separated intomore than one company, each of which would be responsible for transmission and/or generation, whileMEA and PEA would continue to be responsible for distribution. PEA is expected to be regionalizedinto more than one company while there is a possibility that MEA may be split into more than onecompany. The entire power sector would be business-oriented and so would be the transactions forpurchase and sale of electricity between the various parties. A grid code has been drafted for the saleof power by Independent Power Producers (IPPs) and the newly created Electricity GeneratingCompany Limited (EGCO) to the Transmission Company, a role that is currently assumed by EGAT.The current bulk supply arrangements between EGAT and MEA/PEA would no longer be appropriateand a new arrangement would need to be evolved. If a subsidy needs to be provided for electrifyingrural consumers, it may have to be provided through a separate transparent mechanism. Likewise, theGovernment would also consider abolishing uniform retail tariffs throughout the country.

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Annex 10Page 2 of 2

Objectives and Scope of the Study

4. The main objectives and scope of the consulting study would be:

(a) to review the current and future (under a restructured power sector) financial requirementsof EGAT, MEA and PEA and propose a rational basis for setting tariffs that would enablethe three utilities to meet their financial objectives and needs;

(b) to review the existing bulk supply tariff and recommend suitable tariffs for bulk supply toMEA and PEA that would reflect the actual costs of supply and take into account thefuture structure of the power industry in Thailand;

(c) to review the need for a uniform national tariff and suggest a retail tariff structure thatwould be based on economic principles and provide suitably for equity considerations,including the necessary transparent subsidy mechanism;

(d) to suggest a time frame and transition strategy for the implementation of the new bulksupply tariff;

(e) to suggest cost-effective and flexible metering arrangements for measuring and integratingdemand and energy for bulk supply to MEA and PEA considering that PEA may beregionalized into more than one company and MEA could possibly be split into more thanone company; and

(f) recommend draft power purchase agreements for bulk supplies.

Methodology

5. A lot of work has already been done with regard to evaluation of long run marginal costsof supply at different voltage levels etc. This should be taken into account and updated as necessary.Likewise, the consultant would need to refer all available and ongoing studies relating to corporatizationand privatization. The consultant would need to review in detail the investment programs of EGAT,MEA and PEA and their financial objectives and needs in the context of corporatization andprivatization, in establishing the rationale for setting the bulk supply tariffs.

6. In the conduct of the study, the consultant would work closely with the three electricutilities and under the guidance of the National Energy Policy Office.

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Annex 11Page 1 of 2

THAILANDLam Takhong Pump Storage Project

Project Cost Estimate (Stage 1 - 2x25OMW)(Thai Baht million)

Local Foreign Total

Preliminary Works 186.0 0.0 186.0Environmental Plan 184.6 0.0 184.6Civil Works

Upper Pond 560.0 1,306.0 1,866.0Water Way and Power House 710.0 1,659.0 2,369.0

Hydraulic Equipment 401.0 804.0 1,205.0Electro-Mechanical Equipment

Turbine Generators and Accessories 307.5 1,805.0 2,112.5Main Transformers 14.1 121.2 135.3Control System 22.9 134.1 157.0

Transmission SystemSwitchyard 54.3 355.1 409.4Transmission Line 21.5 38.6 60.1Telecommunication 7.5 67.2 74.7

Consulting Services 74.6 334.7 409.3Administration 259.9 0.0 259.9Duties and Taxes 450.9 0.0 450.9

Total Base Cost 3,254.8 6,624.9 9,879.7

Physical Contingencies 309.0 554.4 863.4Price Contingencies 611.2 505.7 1,116.9

Total Project Cost 4,175.0 7,685.0 11,860.0

Notes: Physical Contingencies: Preliminary Works, Environmental Plan and Civil Works - 10%Plant and Equipment - 5%

Price Contingencies: Foreign 2.5% per annumLocal 5.0% per annum

Base Cost: 1994 Price Level

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Annex 11Page 2 of 2

THAILANDLam Takhong Pump Storage Project

Project Cost Estimate (Stage 2 - 2x25OMW)(Thai Baht million)

Local Foreign Total

Preliminary Works 1.9 0.0 1.9Environmental Plan 5.5 0.0 5.5Civil Works 21.1 15.8 36.9Hydraulic Equipment 0.0 0.0 0.0Electro-Mechanical Equipment 288.4 1,701.5 1,989.9Transmission System 283.9 310.4 594.3Consulting Services 28.3 66.2 94.5Administration 94.5 0.0 94.5Duties and Taxes 293.0 0.0 293.0

Total Base Cost 1,016.6 2,093.9 3,110.5

Physical Contingencies 73.1 108.8 181.9Price Contingencies 440.3 362.3 802.6

Total Project Cost 1,530.0 2,565.0 4,095.0

Notes: Physical Contingencies: Preliminary Works, Environmental Plan and Civil Works - 10%Plant and Equipment - 5%

Price Contingencies: Foreign 2.5 % per annumLocal 5.0% per annum

Base Cost: 1994 Price Level

-73- Annex 12THAILAND Page 1 of 2

Lam Takhong Pump Storage ProjectKey Date Schedule for Procurement

Completed By | Action By | Description

Aug. 1994 OECF & EGAT Loan Negotiation

Sep. 1994 OECF & EGAT Loan Agreement Signing

Dec. 1994 IBRD & EGAT Loan Negotiation

Feb. 1995 EGAT (consultant) Completion of Detailed Design

Apr. 1995 EGAT Start of Bidding Period for Civil Works

Apr. 1995 IBRD & EGAT Loan Agreement & Signing

Jun. 1995 EGAT (consultant) Start of Bid Evaluation for Civil Work

Jul. 1995 EGAT Start of Bidding Period for Electro Mech. Equipment (E.M.)

Sep. 1995 EGAT Letter of Intent for Civil Works

Oct. 1995 EGAT (contractor) Start of Bid Evaluation for E.M.

Feb. 1996 EGAT Start of Bidding Period for Main Transformer

May 1996 EGAT Start of Bid Period for Switchyard Equipment

May 1996 EGAT (contractor) Start of Bidding Period for Transmission Line

May 1996 EGAT (contractor) Start of Bid Evaluation for Main Transformer

Jun. 1996 EGAT Letter of Intent for E.M.

Aug. 1996 EGAT Start of Bidding Period for Hydraulic Equipment

Aug. 1996 EGAT (contractor) Start of Bid Evaluation for Switchyard Equipment

Aug. 1996 EGAT (contractor) Start of Bid Evaluation for Transmission Line

Oct. 1996 EGAT (contractor) Start of Bid Evaluation for Hydraulic Equipment

Nov. 1996 EGAT Letter of Intent for Main Transformer

Jan. 1997 EGAT Letter of Intent for Hydraulic Equipment

Jan. 1997 EGAT Letter of Intent for Switchyard Equipment

Jan. 1997 EGAT Letter of Intent for Transmission Line

Sep. 1997 EGAT Start of Bid Period for Control System

Nov. 1997 EGAT (contractor) Start of Bid Evaluation for Control System

Jan. 1998 EGAT Start of Bid Period for Telecommunication System

May 1998 EGAT (contractor) Start of Bid Evaluation for Telecommunication System

May 1998 EGAT Letter of Intent for Control System

Nov. 1998 EGAT Letter of Intent for Telecommunication System

-74- Annex 12Page 2 of 2

Key Date Schedule for Construction

Completed By Action By Descrption

Oct. 1995 EGAT (contractor) Commencement of Civil Works

Jul. 1995 EGAT (supplier) Commencement of Design & Manufacturing of Electro-MechanicalEquipment

Dec. 1996 EGAT (supplier) Commencement of Design & Manufacturing of Main Transformer

Feb. 1997 EGAT (supplier) Commencement of Design & Manufacturing of HydraulicEquipment, Switchyard Equipment & Transmission Line

Dec. 1997 EGAT (supplier) Completion of Design & Manufacturing of Transmission Line

Jan. 1998 EGAT (contractor) Commencement of Work for Transmission Line

Mar. 1998 EGAT (contractor) Commencement of Installation of Hydraulic Equipment

Jun. 1998 EGAT (contractor) Commencement of Installation of Electro-Mechanical Equipment

Jun. 1998 EGAT (contractor) Completion of Upper Pond

Jul. 1998 EGAT (contractor) Commencement of Work for Control System

Sep. 1998 EGAT (contractor) Commencement of Main Transformer Installation

Oct. 1998 EGAT (contractor) Commencement of Switchyard Equipment Installation

Dec. 1998 EGAT (contractor) Completion of Main Transformer Installation

Jan. 1999 EGAT (contractor) Commencement of Work for Telecommunication System

May 1999 EGAT (contractor) Completion of Work for Telecommunication System

May 1999 EGAT (contractor) Completion of Transmission Line

Sep. 1999 EGAT (contractor) Completion of Switchyard Equipment Installation

Nov. 1999 EGAT (contractor) Completion of Civil Work

Nov. 1999 EGAT (contractor) Completion of Hydraulic Equipment Installation

Nov. 1999 EGAT (contractor) Completion of Control System Installation

Feb. 2000 EGAT (contractor) Completion of Electro-Mechanical Equipment Installation

Feb. 2000 EGAT (contractor) Commissioning of Unit I

May 2000 EGAT (contractor) Commissioning of Unit 11

-75-

Annex 13Page 1 of 2

THAILAND

Lam Takhong Pump Storage Project

Contract Packages

Tender Items

1. CONTRACT - Ti UPPER POND- Earth Works- Surface Membrane Fill Dam- Drainage System- Road around Upper Pond

WATERWAY, POWERHOUSE & SWITCHYARD- Tunnel Works for Penstock, Tailrace, Powerhouse Access Tunnel

and Access Tunnel to Penstocks- Underground Powerhouse- Concrete works for Intake Structure and Outlet structure- Surge Shafts and Gate Shafts- Grounding System- Lighting System- Switchyard

2. CONTRACT - T2 PUMP-TURBINES- Pump-turbines- Inlet Valves- Speed Governors- Pressure Oil Supply System- Compressed Air Supply System- Water Supply and Drainage System- Penstock Filling Pump

GENERATOR-MOTORS- Generator-motors- Excitation System- Pump Starting Equipment- Neutral Grounding System- Protection System

POWER PLANT EQUIPMENT- 16.5 kV Circuit Equipment- Station Service Circuit Equipment- Powerhouse Paging System- ITV Supervisory System- DC Supply System- Control Cable and Power Cables, Ground Wires, Ground Rods and

Accessory Equipment- Water Level Measurement Device- Diesel Engine Generator- Fire Extinguishing System- Cable Tray & Cable Rack, Support- Powerhouse Cranes- Transformer Cranes- Dam Power Supply Equipment

-76-Annex 13Page 2 of 2

Tender Items

3. CONTRACT - T3 HYDRAULIC EQUIPMENT- Draft Tube Gate- Tailrace Gate- Steel Penstock- Bifurcation- Trashracks

4. CONTRACT - T4 MAIN TRANSFORMERS- Transformers- Fire Extinguishing System

5. CONTRACT - T5 SWITCHYARD EQUIPMENT- 230 kV Switchyard Equipment- 230 kV XLPE Cables and Cable Support- Switchyard Steel Structure

6. CONTRACT - T6 TELECOMMUNICATION SYSTEM

7. CONTRACT - T7 CONTROL AND INFORMATION MANAGEMENT SYSTEM

8. CONTRACT - T8 TRANSMISSION SYSTEM

-77-

Annex 14

THAILAND

Lam Takhong Pump Storage Project

Disbursement Schedule

IBRD Estimated Disbursement Disbursement Profile /aFY Annual Cumulative Project Country Standard

(US$ million) (%)

1996 9.0 9.0 9.0 1.01997 26.0 35.0 35.0 6.01998 34.0 69.0 69.0 22.01999 24.0 93.0 93.0 52.02000 7.0 100.0 100.0 74.02001 - - 90.02002 100.0

/a Standard profile of disbursements for power projects in Asia.

THAILANDLam Takhong Pumped Storage Project

Environmental Plan and Budget

_ iFiscal YearPlajn I Implementing _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ rT- r - Respontshiei (Budget

Period I994 199S 1996 1997 |1998 | 1999 2W0( | 2001 2002 1 200312004 12005 2006 2007 200tl Agencies Ilion Bahit

Project Construction__ _ _ TI ' -- _ _ _ _ _ _

1. Preparation _____iT_________

2. Construction _ j I I | 13. Production _1/_>_2/_>

Ensironmental hlitigation and Development ________i__

Plan for environnmeital mitigation and development before constructbGn

LPublic Renaion 8 ymars _ andEGAT 10o r

2. Compensation I year 6 moialis I _ j =ThecCoinniitce 42 00

3. Life quality development 8 years _ The Coiiiiiittee 21 65

4. Agfo co-op. establishment I year 6 months > | _ IDept. of Coop. 24.43

5. Occupation deveclpment II years _ The Conmiutee 2387

Plai for environmenlal mitigationi anid development during construction

preveniUon of soil erosion 4 years 1 25

*comrol and pI sp iun of s:dimeti 4 years ECGAT with thedispersion in the reservoir cooperation with

prevention of air pollution. noise and 4 years OEPP, Dept ofvibration Hi-g-hway-. De-pnHealr

* mitigation and developmntu of utraffc syn. 4 year

* preparation for hygiene at the cost. site 4 years |_|

Plan for envrnmettal mitigation and development after construction

I Environnrnal rehabilitatin and dev, in 14 years > RFD & EGAT 58 63the project site

2. Fishery resource conservation in 7 ycars DOF&EGAT 1075Lamn Takhong reservoir

3. Waler resource management .6 years > RID h EGAT 100

4. Land allocation 3 years The Conniittee 7 00

Plan for Monitoring and Evaluating the Environmental Mitigation asnd levelopmnent OEPP SUprNvisi,1n1 18 57

I Plan tor monioring and evaluating the forest rehabilitation 7 yrars |_>______

2. Plan for monitoring and evaluating the aquatic biology and t0 years >fishery in the Lan Takhong reservoir

3. Plan for moniLoring and evaluating the water resource 6 years >

nutagement c

4 Plan for onnilorinng and cvaluating itie soio-econonic 8 ycrs > | >5. Plan for moniloring Jakd cvaluatinig the public health 6 years ____________> _J ________ i_

TOTA L[ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ 2 9 S

enarks. Coliiiigeciwics for the budget has been added to the projcct budget1/ Starts Phase I eleciricity generation OEPP - Office of the Enviromnental Policy and Plan EGAT - Electricity Generating Authority of Thailand2/ Starts Phase 2 electricity generation RFD - Royal Forestry Depanment- > Lo be imsplemetntd continuously by the responsible unts DOF - Departmtent of Fishery

-79- Annex 16

Page 1 of 3

THAILANDLam Takhong Pump Storage ProjectEGAT'S Past Financial Performance

Financial Statements 1989-1993, Income Statement(Million Baht)

1989 1990 1991 1992 1993

Energy Sales (GWh) 33,701 39,369 44,773 50,771 56,558Increawe(%) 14.3 16.8 13.7 13.4 11.4AveragePrice (B/KWh) 1.26 1.26 1.26 1.22 1.20

Operating Revenue:Sales of Electricity 42,114 49,296 56,184 61,860 67,798Other Revenue 535 1,114 1,031 842 665

Total 42,649 50,410 57,215 62,702 68,463

Operating Expenses:FuellBulkPower 19,544 24,138 30,499 32,449 35,144Operaions 5,545 5,161 6,320 7,275 8,698Depreciation /a 4,862 5,573 6,609 8,117 9,777

Total Operating Expenses 29,951 34,872 43,428 47,841 53,619

Operting Income 12,698 15,538 13,787 14,861 14,844

Non-Operating Expenses:Interest Charged to Operations (Power) 4,321 4,340 4,288 4,584 6,048Foreign Exchange Loss 1,677 1,670 1,590 2,110 2,157Revenue from Investment (-) 0Mining Income (-) 928 883 1,391 942 1,413

Total Non-Operating Expcmses (Net) 5,070 5,127 4,487 5,752 6,792

Net Income 7,628 10,411 9,300 9,109 8,052

Rate Bae 95,536 133,357 139,255 156,069 184,319Rate of Return(%) 11.65 11.29 8.24 6.74 5.48Operating Ratio(%) 70.23 69.18 75.90 76.30 78.32

/s 0 Rcvalued Asws.

-80- Annex 16

Page 2 of 3

THAILANDLam Takhong Pump Storage ProjectEGAT'S Past Financial Performance

Financial Statements 1989-1993, Sources and Application of Funds(Million Baht)

1989 1990 1991 1992 1993

Source. of FundsIternal Cash GOeration:

No Income Bcefore Interest 12,698 14,922 13,744 13,906 14,277Depreciai 4,862 5,573 6,609 8,117 9,777Adjustmt of Non-Cash Items 826 4,162 4,930 5,818 5,613

Total Generaed from Operations 18,386 24,657 25,283 27,841 29,667

Odthr Sources of Funds:Capibl Contribution 195 48 10 120 69

Surplus from Contribution 0 104 115 135 149

Consumer Contribution 1,424 0 0 88 0

Borro-ing 8,024 18,208 27,426 17,916 24,135

Inre/(Dcre) in Working Capital (2,350) 880 (167) 2,865 1,126

Tobl Sources of Funds 25,679 43,897 52,667 48,965 55,146

Avelication of FundsNotSlnkingFundforRedemption 0 839 (1,151) 885 1,063

CapibklReduced 0 0 213 0 0

Ddk Service:Princilpa 6,957 7,178 13,368 12,860 8,853Interea anLoen 4,321 4,511 4,443 4,794 6,226Deferred Intreat 0 61 8 51 10Total Debt Service 11,278 11,750 17,819 17,705 15,089

Capit Exp _n: 11,094 26,603 30,426 21,984 30,303

IMC 711 860 1,472 1,843 1,483Todal Capitl Expenditure 11,805 27,463 31,898 23,827 31,786

Deveopmnt Expenditue 1,032 1,215 1,614 2,628 3,430Bonus 0 1,067 1,274 1,205 1,312Rnittace 1,564 1,563 1,000 2,614 2,468Invemat in Subidiazy 0 0 0 100 0

Total Application 25,679 43,897 52,667 48.964 55,146

Debt Service Coverage (tim) 1.40 1.65 2.21 1.72 1.39Self-Flnanng Rabo (%) /a 33.00 29.57 38.66 27.70 27.42

/a imaI cash genuratiol ks development expenditure, bonus, remittane, sining fund redemptlin, debt ervice sndehop in wosklg capital expresd as percentage of tbege yan' avrerge capital expendiue an power, irrlgatice,min nd davdcqp.aL

-81- Annex 16

Page 3 of 3

Lam Takhog Pump Storage ProjectEGAT'S Pat Financial Performance

Financial Statements 1989-1993, Balance Sheet(Million Baht)

1m 1990 1991 1992 1993

ASSETSFixed Axmob - Pboew:Plant in Service (Rovalued) 161,943 213.388 234,008 271,008 316,990Lem: Deprecatdan 54,313 73,959 82,896 97,101 107,967Net 107,630 139,429 151,112 173,907 209,023Work in Propam 20,412 31,073 43,238 46,872 37,623

Total Fixed Asmo 128,042 170,502 194,350 220,779 246,646

Not Anitx of Sinking Fund:Property Iaurance 6,717 3,159 3,651 3,985 4,360Mtine Reclanatin 264 350 451 557

Total 6,717 3,423 4,001 4,436 4,917

Other Auits 0 9,070 7,152 7,693 9,592Long Tom Invotmat 0 0 0 100 100

Currait Anust:

MigUlal nd Supplbm 2,657 2,541 2,899 3,036 4,472Acoounts Receivable 7,467 8,730 8,820 10,510 9,107Cash 5,456 6,054 7,074 2,363 2,697

Tobd Curnx* Anita 15,580 17,325 18,793 15,909 16,276

TOTAL ASSETS 150,339 200,320 224,296 248,922 277,531

LIABLrES AND EOUrfY

EquiyCapital Ctariutim 8,536 11,130 10,866 10,926 10,935Surpiu firon Cc _do. 4,552 1,303 1,419 1,894 2,043Roibaed Erinng 35,646 49,529 55,800 61,355 64,577Revaluatkm Re.rve 34,516 54,118 53,364 63,469 67,701Def£cnd Forex Adjusnemt (11,715) (12,754) (10,978) (13,630) (14,125)

Total Equity 71,535 103,326 110,471 124,514 131,131

Inarunce & Mine Reclaumabco 2,937 3,424 4,001 4,437 4,918Lng Tom Dekbt- Not 62,141 74,205 90,268 99,461 117,237OCher Liablkies 0 186 173 212 199

Currat Libilties:Payable 6,911 9,633 11,674 10,758 13,294Currtlatoritkus 5,656 8,191 6,331 8,036 8,737Accruedlunit 1,159 1,355 1,373 1,504 2,015

Tobd Currm t Liabiit 13,726 19,179 19,373 20,295 24,046

TOTAL UABILTRES AND EQUrTY 150,339 200,320 224,296 248,922 277,531

DCkEquy 0.75 0.64 0.74 0.72 0.81Currit Rato 1.14 0.90 0.97 0.78 0.68

-82- Annex 17

Pape 1 of 6

ThI.NDLam Takhong Pump Storage Project

EGAT's Projected Financial PerformanceFinancial Statements 1993-2001, Income Statement

(Million Baht)

1993 1994 1995 1996 1997 1998 1999 2000 2001

Eergy Sales (CiWh) 56,558 63,491 69,971 76,836 83,564 90,638 97,699 105,410 113,853Increaa(%) 11.4 12.3 10.2 9.8 8.8 8.5 7.8 7.9 8.0Avragc Price (BKWh) 1.20 1.23 1.32 1.33 1.54 1.58 1.72 1.87 1.92

Operating Rcveaue:Sales of Eletricity 67,798 78,348 92,452 101,967 128,122 142,664 167,735 196,879 218,199Other Revenuc 665 794 723 650 650 650 650 650 650

Tota 68,463 79,142 93,175 102,617 128,772 143,314 168,385 197,529 218,849

Opeating Expas:FudIBulk Power 35,144 41,002 37,027 42,848 46,561 56,682 60,265 58,847 63,300Operatios 8,698 11,648 19,796 21,240 23,090 24,267 27,812 32,314 35,471Depreciatin /a 9,777 10,970 12,145 14,469 16,859 18,681 24,594 29,992 34,227

Total OpeCaing Expen;e 53,619 63,620 68,968 78,557 86,510 99,630 112,671 121,153 132,998

Operting Income 14,844 15,522 24,207 24,060 42,262 43,684 55,714 76,376 85,851

Non-Operating Expns:int ChargedtoOperaon(Power) 6,048 7,105 7,966 9,351 11,986 14,245 22,534 31,176 30,889Foreign ExchangLow 2,157 2,748 1,667 1,542 1,151 997 908 668 310Reveaue from Iwvetnment) 0 1,530 319 365 411 463 521 579 633Mining income (-) 1,413 1,783 1,318 1.757 2,127 2,381 1,810 2,506 2,855

Total Non-Operating Expenses (Net) 6,792 6,540 7,996 8,771 10,599 12,398 21,111 28,759 27,711

Net Income 8.052 8,982 16,211 15.289 31.663 31,286 34,603 47,617 58,140

Rate Bas 184,319 208,027 233,149 276,591 321,936 347,697 455,201 608,552 668,091Rat.ofR urn(%) 5.48 5.83 7.12 6.13 8.90 8.65 8.84 9.16 9.10OperatinRo(%) 78.32 80.39 74.02 76.55 67.18 69.52 66.91 61.33 60.77

/a On Revaled Aots

-83- Annex 17

Page 2 of 6

THlAIAND

LaIn Takhong Pump Storage ProjectEGAT's Projected Financal Performance

Financial Statements 1993-2001, Sources & Application of Funds(Million Baht)

1993 1994 1995 1996 1997 1998 1999 2000 2001

Source. of FundsInternal CashOeerio:

Net Income Before nlterest 14,279 16,273 24,328 24,936 43,963 45,816 57,405 79,010 89,203Depreciation 9,777 10,970 12,145 14,469 16,859 18,681 24,594 29,992 34,227AdjustmentofNon-Cashltems 5,613 5,934 5,546 6,383 6,714 6,793 8,210 8,210 8,135

Total Gerated from Operations 29,669 33,177 42,019 45,788 67,536 71,290 90,209 117,212 131,565

Other Source. of Funds:Capital Contribution 69 0 0 65 160 0 0 0 0Surplus from Cntrlbution 149 170 0 0 0 0 0 0 0DiapalofPowerPlunt 0 17,140 0 0 0 0 0 0 0

Borrowing 24,135 35,868 51,060 61,400 75,718 92,534 107,526 97,229 130,672

Increste/(Decre) in Working Capial 1,126 (5,501) 5,307 537 (4,317) 5,322 (2,967) (6,245) 55

Total Sources of Funds 55,148 80,854 98,386 107,790 139,097 169,146 194,768 208,196 262,292

Apvlication of FundsNet Sinking Fund for Redemption 1,063 293 24 0 0 0 0 (523) 0

De Serce:Principal 8,853 8,918 10,446 12,086 20,374 19,206 32,497 47,217 63,475Interet on Loan 6,226 7,290 8,115 9,645 12,301 14,529 22,802 31,393 31,062Defenred ntrest on Loan 10 48 17 17 17 18 0 0 0Total Debt Service 15,089 16,256 18,578 21,748 32,692 33,753 55,299 78,610 94,537

Capial Expesdture: 30,303 50,592 58,034 67,734 87,378 104,644 101,857 89,412 127,245EDC 1,483 3,400 6,948 7,470 10,415 14,990 18,461 13,821 17,352Work _conpleted /a 0 379 5,440 (2,352) (4,703) (4,191) 154 3,137 (7,805)Totl Capil Epditure 31,7S6 54,371 70,422 72,852 93,090 115,443 120,472 106,370 136,792

Dvelopmnt ExpeLture 3,430 3,919 4,024 5,198 5,446 5,410 4,266 7,352 9,025Bonas 1,312 1,223 1,052 1,803 1,771 3,305 3,343 3,720 4,997RemItace 2,468 3,403 3,966 6,107 6,013 11,141 11,282 12,557 16,830Invemat in Subsdiary 0 1,390 319 81 86 95 106 111 ill

Total Applicaon of Funds 55,148 80,854 98,386 107,790 139,097 169,146 194,768 208,196 262,292

Debt Swvice Coveage (time) 1.39 1.49 1.77 1.50 1.66 1.52 1.29 1.20 1.07Seif-Ficing Ratio (%) /b 27.42 23.21 27.37 25.00 25.09 31.22 25.00 25.00 25.00

/a Rq,mss prev yer' _upa eiamure d to dlay pnroject h _pma

/b b Is cm& gatiau lem de_mast eVendture, b-n, remae, iW1ag f-d roednpow, det ervie d chele to wokig capitl exnedu pcrcae of eW yeam, avee eupal epeditre e pwer, ifatico, me d devedp_at.

-84- Annex 17

Page 3 of 6

THAILANDLam Takhong Pump Storage Project

EGAT's Projected Financial PerformanceFinancial Statements 1993-2001, Balance Sheet

(Million Baht)

1993 1994 1995 1996 1997 1998 1999 2000 2001

ASSETSFixed Assets - Power:Plant in Service (Revalued) 316,990 347,077 404,892 479,550 549,851 590,685 834,880 985,500 1,056,956Less: Depreciation 107,967 124,041 144,229 168,017 195,622 226,662 265,945 313,194 367,673Net 209,023 223,036 260,663 311,533 354,229 364,023 568,935 672,306 689,283WorkinProgress 37,623 61,137 89,767 107,689 153,666 254,872 159,769 156,293 269,811

Total Fixed Assts 246,646 284,173 350,430 419,222 507,895 618,895 728,704 828,599 959,094

Net Ascts of Sinking Fund:PropertyInsurance 4,360 4,775 5,464 6,298 7,257 8,262 9,815 11,659 13,579MineReclamation 557 682 769 892 1,028 1,170 1,319 1,474 1,636

Total 4,917 5,457 6,233 7,190 8,285 9,432 11,134 13,133 15,215

Other Assets 9,592 11,202 12,371 13,892 15,126 16,197 15,172 16,933 20,832Long Term Investment 100 1,490 1,809 1,890 1,975 2,070 2,176 2,287 2,398

Current Asscts:Matrils and Supplies 4,472 3,300 3,839 4,280 4,625 4,630 6,593 7,452 7,416AccountsReceivable 9,107 11,139 15,198 16,762 21,061 23,452 27,573 32,364 35,868Cash 2,697 9,177 1,500 1,500 3,715 1,500 1,500 1,500 1,500

Total Currcat Assts 16,276 23,616 20,537 22,542 29,401 29,582 35,666 41,316 44,784

TOTAL ASSETS 277,531 325,938 391,380 464,736 562,682 676,176 792,852 902,268 1,042,323

LIABILITIES AND EOUITYEquity:Cpital Contribution 10,935 10,876 10,876 10,941 11,101 11,101 11,101 11,101 11,101Surplus from Contributions 2,043 2,213 2,213 2,213 2,213 2,213 2,213 2,213 2,213Retained Earnings 64,577 68,371 77,424 84,899 103,649 120,348 139,052 166,119 198,825Rcvaluation Reserve 67,701 79,460 88,328 99,816 113,525 129,137 144,995 170,902 201,525Deferred Forex Adjusment (14,125) (13,542) (11,763) (10,137) (8,901) (7,820) (6,828) (6,076) (5,762)

Total Equity 131,131 147,378 167,078 187,732 221,587 254,979 290,533 344,259 407,902

Insurance & MineReclamation 4,918 5,457 6,234 7,189 8,285 9,432 11,134 13,133 15,216LongTerm Debt - Net 117,237 144,878 183,771 224,797 281,310 341,347 401,656 435,410 478,168Other Liabliltie 199 149 132 115 98 80 80 80 80

Cumat Liabilities:Payables 13,294 15,661 19,664 21,448 28,561 32,141 34,386 38,147 45,046Current Maturities 8,737 10,366 12,086 20,374 19,206 32,497 47,217 63,475 87,914Accrued Interest 2,015 2,050 2,416 3,080 3,637 5,700 7,848 7,766 7,997

Total Currnt Liabillies 24,046 28,077 34,166 44,902 51,404 70,338 89,451 109,388 140,957

TOTAL LIABMLITIES AND EQUITY 277,531 325,938 391,380 464,736 562,682 676,176 792,852 902,268 1,042,323

DeWEquity 0.81 0.90 1.03 1.14 1.22 1.30 1.35 1.24 1.16Current Ratio 0.68 0.84 0.60 0.50 0.57 0.42 0.40 0.38 0.32

-85- Annex 17Page 4 of 6

THAILAND

Lam Takhong Pump Storage Project

EGAT's Financial Projections- Assumptions

Revenues

1. Power will be generated in accordance with the gross generation pattern, prepared bythe System Operations Department, which assumes that the Rayong Power Plant (fuelled by naturalgas) would be operated as a privatized supplier from October 1994.

2. The revenue forecast assumes that demand will rise by an average of 8% betweenFY95-2001 in accordance with estimates prepared in FY93 by the Economic Policy Departmentbased on "Load Forecast for the Thailand Electric System". Energy sales will grow by 12% inFY94, 10% per year in FY95 to FY97 and by 8% per year in FY98 until FY2001. Theseprojections are basically extrapolations of recent trends checked against econometric modelsinvolving assumptions on growth of the gross domestic product.

3. The average price of electricity is about Baht 1.20 per KWh sold in 1993. A priceincrease of about 9% would be necessary during the tariff setting period in FY95 (every threeyears) in order to achieve an acceptable level of self financing for FY95-96. Price increasesaveraging about 8% per year between FY97 and FY2001 would be required to keep the self-financing ratio at 25%. EGAT's average electricity price annual increases, and self financingratios for FY95 through FY2001 are shown below:

| FY94 I FY95 I FY96 I FY97 I FY98 I FY99 [ FY00 [ FY01

Average energy price with 1.23 1.32 1.33 1.54 1.58 1.72 1.87 1.92fuel adj. factor (B/kWh) _ _ 0

Price increase (%) _ 9.6 0 3 16.1 12.1 _ 12.0 3.0

Self-financing ratio (%) 23 27 25 25 31 25 25 25

4. There will be no change in the tariff structure before September 1994. Adjustmentswill however be made to the price charged to EGAT's customers to recoup the cost relating to:(a) changes in fuel cost, excluding lignite; (b) VAT; (c) land and property taxes; and (d) powerpurchased from EGCO.

Fuel Cost

5. The fuel mix is based on EGAT's least cost generation plan. All fuel costs, with theexception of lignite, are included in the projections at cost estimated at June 1993. These expensesare based on fuel prices used in the calculation of the present tariff structure as follows: (a) Heavyoil at Baht 3.15 per liter; (b) Light oil at Baht 7.44 per liter; and Gas at Baht 68 per million BTU.

-86- Annex 17Page 5 of 6

6. Although the cost of lignite has initially been included in fuel costs at the currenttransfer price of Baht 501.54 per tonne, the projected profit of the lignite sector is eliminated alsothrough fuel costs. This effectively reduces the price of lignite to its production cost.

7. If the level of demand for the different fuels varies from the projected, such varianceis likely to be met by a change in the projected level of power generated by heavy oil.

Operating Costs

8. Generation expenses are based on current EGAT experience, with projections forfuture plants based on historical costs for similar plants and escalated with inflation rates of 5 % perannum.

9. The projected purchased power is based on the generation pattern noted in para. 1.Power purchased from EGCO of 7.7 billion KWh (the net generation of the Rayong Power Plant)has been included in the projections at an average price of Baht 1. 15 per KWh. Power purchasefrom Lao PDR's EDL is priced at Baht 0.95 KWh and from Malaysia's TNB at Baht 1.53 KWhthroughout the projected period.

10. Transmission expenses are projected on the basis of an econometric model offorecasting by relating unit costs and additions in line length and transformer capacity in EGAT'sexpansion program.

1l. General and Administrative expenses are based on current levels in the first year ofprojection. Subsequent year's expenses are escalated with the local escalation factor at the rate of5% plus an increase in real terms of 3 %.

12. Depreciation is based on the straight-line method on revalued fixed assets. Theaverage rate of depreciation is 1.33% for hydropower plants, 4% for other generating facilities,2.5% for transmission lines, and 4% for substations.

Govermuent Remittance

13. The rate of remittance to the Government of Thailand is calculated at 30% of EGAT'snet income (based on revalued depreciation). This is to date the highest tax rate levied by theMinistry of Finance and is in line with the requirements needed for EGAT to qualify for a "GoodState Enterprise" status.

Capital Investment

14. Projected capital expenditures are those estimated to provide the additional plant andequipment required to meet the demand forecast, escalated in accordance with the latest projectionof inflation rates. These expenditures are projected in accordance with the power developmentplan.

-87- Annex 17Page 6 of 6

Sale of Rayong Power Plant

15. The assumptions for the privatization of the Rayong Power Plant can be summarizedas follows: (a) date of privatization of August 1994; (b) EGAT will recover the effect of powerpurchased from Rayong in the automatic price adjustment; (c) profit of Baht 1.5 billion (net ofEGAT's equity investment of Baht 2.5 billion) from selling Rayong will be booked as non-operating income in the income statement; (d) the proceeds from the sale of Rayong will be usedfor other capital investment rather than repayment of loans which financed the plant; and (e) loansof the Rayong plant will remain in EGAT's books with interest on the loans capitalized in worksunder construction.

Equity Contribution

16. Equity contributions represent the Government of Thailand's reimbursement forimport duties on construction equipment and partial payment with respect to the irrigation portionof multi-purpose dams.

Foreign Exchange Losses

17. Deferred foreign exchange losses represent the profits and losses from exchange ratevariations on long-term debt. The projected figures are the amount on EGAT's accounts at theend of FY93 less the incremental amounts which are scheduled to be written off over theremaining period of EGAT's existing loans. The amounts shown in the income statement andbalance sheet reflect currency movements against the Baht.

Borrowings

18. Future foreign loans have been assumed at annual interest rates varying from 3% to9% with repayment terms of up to 20 years including from three to five years of grace. Futurelocal borrowings have been assumed at an annual interest rate of 11 % repayable up to 10 yearsincluding three years of grace.

Current Assets

19. Accounts receivables are projected to be approximately two months of revenues inaccordance with a government regulation affecting state enterprises. Accounts payable areprojected at the equivalent of two months of total expenses, excluding depreciation expenses andforeign exchange loss. On the basis of EGAT's future expansion plans, spare parts, materials andsupplies are estimated at Baht 1.2 billion and augmented by about 1% of pre-revalued net fixedassets. Fuel stock for reserve is fixed at 150 and 35 million liters of heavy and light oil,respectively.

-88-

Annex 18THAILAND

Lam Takhong Pump Storage ProjectEGAT Tariff Rates

Effective Date: December 1, 1991

1. MEA

Energy Charge 1,4682 Baht/kWh

2. PEA

Energy Charge 0.9630 Baht/kWh

3. Large General Service

Monthly Charge by Time of Day Rate

3.1 Transmission Voltage (Voltage level of 69 kV and above)

Demand ChargePeak Period (18.30-21.30 hr.) 240.00 Baht/kWPartial-Peak Period (08.00-18.30 hr.) 32.00 Baht/kW

(Only demand in excess of Peak Period)Off-Peak Period (21.30-08.00 hr) free of charge

Energy Charge 1.03 Baht/kWh

3.2 Primary Voltage (Voltage level of 11 - 33 kV)

Demand ChargePeak Period (18.30-21.30 hr.) 305.00 Baht/kWPartial-Peak Period (08.00-18.30 hr.) 63.00 Baht/kW

(Only demand in excess of Peak Period)Off-Peak Period (21.30-08.00 hr.) free of charge

Energy Charge 1.07 Baht/kWh

3.3 Secondary Voltage (Voltage level below 11 kV)

Demand ChargePeak Period (18.30-21.30 hr.) 356.00 Baht/kWPartial-Peak Period (08.00-18.30 hr.) 73.00 Baht/kW

(Only demand in excess of Peak Period)Off-Peak Period (21.30-08.00 hr.) free of charge

Energy Charge 1.10 Baht/kWh

Minimum Charge

The minimum charge shall be computed as 70% of the maximum demand charge of the last 12-monthperiod ending with the current month.

Automatic Adjustment Mechanism

Should there be any fluctuations in expenditures that are not within the control of the Electricity Authorityresulting in the sale of energy at 2 stangs/kWh and above, electricity charge will be adjusted to increase or decreaseaccordingly. This adjustment will be shown in the customer's monthly bill.

THAILANDLam Takhong Pump Storage Project

EGAT's Investment Program *(in US$ million)

FY95 FY96 FY97 FY98 FY99 FY95-99Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total Total

A. Thermal PlantsS. Bangkok CC #2 171 292 463 463Wang Noi CC #1&2 434 676 1,110 1,110Wang Noi CC #3 172 289 461 461Krabi Thennal #1 - - - 174 200 374 374Krabi Thermal #2 - - - - - - - - - 174 201 375 375New Thermal #1 - - - 733 683 1,416 1,416New Thermal #2 - - - 687 648 1,335 1,335Ratchaburi Thermal #1 - - - 378 407 785 785Ratchaburi Tbermal #2 - - - 257 366 623 623Ratchaburi Thermal #3 - - - 293 400 693 693Ratchaburi Thermal #4 - - - 266 366 632 632New Peaking GT#1&2 - - - - - - 49 99 148 148New Peaking GT # 3-9 - - - - - - - - - 177 354 531 531

Subtotal 777 1,257 2,034 2,788 3,070 5,858 49 99 148 351 555 906 - - - 8,946

B. Hydro PlantsBhunibol Rehab #3&4 10 22 32 - - - - - - - - - - - - 32

Subtotl 10 22 32 - - - - - - - - - - - - 32

C. TraXiui.EGAT-TNB #2 104 82 86 86Trans. Expn. #9 - - - 190 147 337 337Trans. Expn. #10 - - - - - - 207 166 373 337Trams. Expn. #11 - - - - - - - - - 229 183 412 412500kV Tran. Expn. - - - 101 142 243 - -- - - - 243115kV Chiangnai-Hong Son - - - 15 3 18 18500kV for Mae Kham #1&2 - - - - - - 9 7 16 16500kV for New Thennall #4 - - - - - - - - - - - - 237 69 306 306

Subtobl 104 82 186 306 293 S99 216 173 389 - - - 466 252 718 1,892

D. Iignte MningMae Mob Mine Expn. #12&13 - - - 65 76 141 - - - - - - 141Mae Moh Expn. Mae Kham #1&2 - - - - - - 21 32 53 - - - - - - 53

Subtotal 65 76 141 21 32 53 - - - 194

E. MiscellaneousPower Supply Greater Bangkok - - - 149 167 316 149 167 316 316

Total 891 1.361 2,252 3308 3.606 6.914 2 304 590 351 555 906 466 252 718 11.380Program Commitments

THA4AND

Lam Takhong Punp Storage Project

Economic Fuel Price for Optimization of EGAT Power Development Plan(1994 Price Level)

Fiscadl Natural Gas a/ LNG a/ _ Lignite (Mae Moh) b/ Lignite (Sin Pun) b/ | Import Coal c/

Year USD/MBtu THBI/MBtu % Inc. USD/MBtu | THB/MBtu Inc. USD/MBtu [THB/MBtu |_% Inc. USD/MBtu THB/MBtu % Inc. | USD/MBtu THB/MBtu | % Inc.

1994 2.06 53.56 - 3.92 101.92 - 1.12 12.83 - 1.61 18.73 - 1.93 51.00 -

1995 1.95 50.60 -5.53 4.05 105.31 3.33 1.12 12.83 0.00 1.61 18.73 0.00 1.97 51.90 1.761996 2.15 55.82 10.32 4.27 110.96 5.36 1.12 12.85 0.16 1.61 18.76 0.16 2.00 52.70 1.541997 2.20 57.08 2.26 4.42 114.91 3.56 1.12 12.87 0.16 1.61 18.78 0.11 2.03 53.70 1.901998 2.25 58.61 2.68 4.59 119.43 3.93 1.12 12.88 0.08 1.62 18.81 0.16 2.07 54.60 1.681999 2.25 58.60 -0.02 4.79 124.51 4.26 1.12 12.90 0.16 1.62 18.84 0.16 2.11 55.60 1.832000 2.26 58.74 0.24 4.98 129.60 4.08 1.12 12.92 0.16 1.62 18.86 0.11 2.14 56.50 1.622001 2.27 58.90 0.27 4.98 129.60 0.00 1.12 12.91 -0.08 1.62 18.84 -0.11 2.15 56.70 0.35 12002 2.23 57.95 -1.61 4.98 129.60 0.00 1.12 12.89 -0.15 1.62 18.82 -0.11 2.16 56.90 0.352003 2.20 57.24 -1.23 4.98 129.60 0.00 1.12 12.88 -0.08 1.61 18.79 -0.16 2.17 57.20 0.532004 2.19 56.82 -0.73 4.98 129.60 0.00 1.12 12.86 -0.16 1.61 18.77 -0.11 2.17 57.40 0.352005 2.12 55.12 -2.99 4.98 129.60 0.00 1.12 12.85 -0.08 1.61 18.75 -0.11 2.18 57.60 0.352006 2.11 54.90 -0.40 4.98 129.60 0.00 1.12 12.83 -0.16 1.61 18.72 -0.16 2.18 57.60 0.002007 2.10 54.63 -0.49 4.98 129.60 0.00 1.11 12.82 -0.08 1.61 18.70 -0.11 2.18 57.60 0.002008 2.07 53.90 -1 .34 4.98 129.60 0.00 1.11 12.81 -0.08 1.60 18.68 -0.11 2.18 57.60 0.002009 2.06 53.64 -0.48 4.98 129.60 0.00 1.11 12.79 -0.16 1.60 18.66 -0.11 2.18 57.60 0.002010 2.05 53.37 -0.50 4.98 129.60 0.00 1.11 12.78 -0.08 1.60 18.63 -0.16 2.18 57.60 0.002011 2.04 53.11 -0.49 4.98 129.60 0.00 1.11 12.77 -0.08 1.60 18.61 -0.11 2.18 57.60 0.00

Notes: a/ Estimated by PIT.b/ Based on production cost estimated by Mine Engineering Departmnt.cl Based on FOB price, estimated by IBRD.

Source: EGAT

m :>0 a

o oI.9

THAILAND

Lam Takhong Pump Storage Project

Fuel Price for Optimization of EGAT Power Development Plan(1994 Price Level)

Fuel Oil (3.5% Sulfur) Fuel Oil (2.0% Sulfur) | Fuel Oil (1.0% Sulfur) Fuel Oil (0.5% Sulfur) Diesel OilFiscal.YeFa USDIMBtu THB/MBtu % Inc. USD/MBtu THB/MBtu % Inc. USD/MBtu THB/MBtu % Inc. USD/MBtu THB/MBtu % Inc. USD/MBtu THB/MBtu I

1994 2.20 2.21 - 2.44 2.45 - 2.56 2.57 - 2.64 2.65 - 3.43 3.17 -1995 2.20 2.21 0.00 2.44 2.45 0.00 2.55 2.56 -0.39 2.72 2.74 3.40 3.57 3.30 4.101996 2.23 2.24 1.36 2.47 2.48 1.22 2.59 2.60 1.56 2.89 2.91 6.20 3.79 3.50 6.061997 2.25 2.26 0.89 2.50 2.51 1.21 2.62 2.63 1.15 3.00 3.02 3.78 3.95 3.65 4.291998 2.28 2.29 1.33 2.53 2.54 1.20 2.66 2.67 1.52 3.13 3.15 4.30 4.12 3.81 4.381999 2.32 2.33 1.75 2.57 2.58 1.57 2.70 2.71 1.50 3.28 3.30 4.76 4.32 3.99 4.722000 2.35 2.36 1.29 2.61 2.62 1.55 2.73 2.75 1.48 3.43 3.45 4.55 4.51 4.17 4.512001 2.31 2.32 -1.69 2.56 2.57 -1.91 2.69 2.70 -1.82 3.43 3.45 0.00 4.51 4.17 0.002002 2.27 2.28 -1.72 2.52 2.53 -1.56 2.65 2.66 -1.48 3.43 3.45 0.00 4.51 4.17 0.002003 2.23 2.24 -1.75 2.47 2.48 -1.98 2.60 2.61 -1.88 3.43 3.45 0.00 4.51 4.17 0.002004 2.19 2.20 -1.79 2.43 2.44 -1.61 2.56 2.57 -1.53 3.43 3.45 0.00 4.51 4.17 0.002005 2.15 2.16 -1.82 2.39 2.40 -1.64 2.51 2.52 -1.95 3.43 3.45 0.00 4.51 4.17 0.002006 2.11 2.12 -1.85 2.34 2.35 -2.08 2.47 2.48 -1.59 3.43 3.45 0.00 4.51 4.17 0.002007 2.08 2.09 -1.42 2.30 2.31 -1.70 2.43 2.44 -1.61 3.43 3.45 0.00 4.51 4.17 0.002008 2.04 2.05 -1.91 2.26 2.27 -1.73 2.38 2.39 -2.05 3.43 3.45 0.00 4.51 4.17 0.002009 2.00 2.01 -1.95 2.22 2.23 -1.76 2.34 2.35 -1.67 3.43 3.45 0.00 4.51 4.17 0.002010 1.97 1.98 -1.49 2.19 2.20 -1.35 2.30 2.31 -1.70 3.43 3.45 0.00 4.51 4.17 0.002011 1.94 1.95 -1.52 2.15 2.16 -1.82 2.26 2.27 -1.73 3.43 3.45 0.00 4.51 4.17 0.00

Notes: a/ Estimated by TT.

Source: EGAT

t1E

o 0

-92-

Annex 21

THAMlANDLam Takhong Pump Storage Project

Rate of Return on EGAT Power Development Plan(all figures in Baht million)

Cost Strcam Beaefit StrcamYear Capitl OhM FuI Total Incrmentt Averag Seling Prec Sdc Nct

Cost Cost Cost Cost Energy (c/kWh) Revcnue BeefitSale Current Constnt

(GWh) Price 94 Pricw

1983 0.00 0.00 0.001984 0.00 0.00 0.001985 0.00 0.00 0.001986 1.46 1.46 0.00 (1.46)1987 0.80 0.80 0.00 (0.80)1988 23.10 23.10 0.00 (23.10)1989 315.26 315.26 0.00 (315.26)1990 1,125.34 1125.34 4.8438 5.7285 0.00 (1,125.34)1991 954.79 15.87 213.43 1184.09 5,404.0 4.8281 5.4004 291.84 (892.25)1992 757.43 55.65 292.14 1105.22 11,402.0 4.6800 5.0269 573.17 (532.05)1993 1,075.70 69.18 386.95 1531.83 17,189.0 4.6088 4.7931 823.89 (707.94)1994 1,562.68 86.26 507.38 2156.32 24,122.0 4.6023 4.6023 1,110.17 (1,046.15)1995 2,291.32 132.75 483.65 2907.72 30,602.0 5.4765 5.2158 1,596.14 (1,311.58)1996 1,911.53 144.87 664.53 2720.93 37,467.0 5.6262 5.1031 1,911.98 (808.95)1997 2,110.30 205.45 763.82 3079.57 44,195.0 6.3062 5.4477 2,407.61 (671.96)1998 2,406.94 208.53 919.02 3534.49 51,269.0 6.4888 5.3385 2,737.00 (797.49)1999 1,572.46 328.30 1,067.90 2968.66 58,330.0 6.9535 5.4481 3,177.88 209.222000 341.26 403.21 1,140.66 1885.13 66,041.0 7.5485 5.6331 3,720.16 1,835.032001 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292002 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292003 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292004 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292005 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292006 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292007 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292008 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292009 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292010 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292011 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292012 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292013 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292014 403.21 1,140.66 1543.87 66,041.0 7.5485 5.6331 3,720.16 2,176.292015 (4,446.54) 403.21 1,140.66 -2902.67 66,041.0 7.5485 5.6331 3,720.16 6,622.83

Economic Internal Rate of Return 12.03%

Note: All costs are based on 1994 price level.Source: EGAT

-93- Annex 22THALAND

LAm Takong Pump Storag ProjectCapital Costs

(al figures in Bahit million)Lam Takhong 4 x 250 MW Gas Turbinbs 11 x 100 MW

Year Units I A 2 Trn. Units 3 & 4 Trans. Tobl Unib 1-6 Tns. Units 7-11 Tras. Total2x2S50 MW System 26250 MW Syse cos 6:10 MW Sytm 5x1O0 MW Sysem Cost

1993 0.0 0.01994 262.2 262.2 0.01995 600.5 600.5 0.01996 1699.0 1699.0 0.01997 3111.5 94.8 3206.3 643.1 643.11998 2501.8 422.4 2924.2 1243.4 0.6 1244.01999 1199.9 54.1 23.6 1277.5 5637.8 125.9 5763.72000 301.2 33.2 3.4 337.7 890.8 206.5 536.0 1633.32001 306.6 183.4 490.0 1036.1 0.6 1036.72002 1453.6 386.7 1840.2 4698.1 124.4 4822.52003 529.0 50.6 579.6 742.5 250.1 992.62004 0.0 0.02005 0.0 0.02006 0.0 0.02007 0.0 0.02008 0.0 0.02009 0.0 0.02010 0.0 0.02011 0.0 0.02012 0.0 0.02013 0.0 0.02014 0.0 0.02015 0.0 0.02016 0.0 0.02017 0.0 643.1 643.12018 0.0 1243.4 1243.42019 0.0 5637.8 5637.82020 0.0 890.8 536.0 1426.82021 23.6 23.6 1036.1 1036.12022 33.2 33.2 4698.1 4698.12023 306.6 306.6 742.5 742.52024 1453.6 23.6 1477.1 0.02025 529.0 33.2 562.1 0.02026 306.6 306.6 0.02027 1453.6 1453.6 0.02028 529.0 529.0 0.02029 0.0 0.02030 0.0 0.02031 94.8 94.8 0.6 0.62032 422.4 422.4 125.9 125.92033 54.1 3.4 57.4 206.5 206.52034 183.4 183.4 0.6 0.62035 386.7 386.7 124.4 124.42036 50.6 50.6 250.1 250.12037 0.0 643.1 643.12038 0.0 1243.4 1243.42039 0.0 5637.8 5637.82040 0.0 890.8 536.0 1426.82041 0.0 1036.1 1036.12042 0.0 4698.1 4698.12043 0.0 742.5 742.52044 0.0 0.02045 0.0 0.02046 0.0 0.02047 0.0 0.02048 0.0 0.02049 -277.0 -281.5 -359.3 -917.8 -4207.6 -187.6 -4558.1 -216.0 -9169.3

Costs based on December 1994 Price Lovels.

-94- Annex 23

THAILANDLam Takhong Pump Storage Project

Project's Economic Rate of Return(all figures in Baht million)

Lagm Takhong 4 x 250 MW Gas Turbines 11 x 100 MWYear Capital OhM Inc. Fuel Cost (HFO) Tota CaIpital OhM Total Net

Cost Cost Mil L THB/Lt Tot Cost Cost Cost Cc,t Benefit

1993 0.0 0.0 0.0 0.0 0.0 0.01994 262.2 0.0 262.2 0.0 0.0 -262.21995 600.5 0.0 600.5 0.0 0.0 -600.51996 1699.0 0.0 1699.0 0.0 0.0 -1699.01997 3206.3 0.0 3206.3 643.1 643.1 -2563.21998 2924.2 0.0 2924.2 1244.0 1244.0 -1680.21999 1277.5 0.0 1277.5 5763.7 5763.7 4486.22000 337.7 105.3 11.3 3.5 39.0 482.0 1633.3 258.3 1891.6 1409.62001 490.0 105.3 16.8 3.5 58.0 653.3 1036.7 258.3 1295.0 641.62002 1840.2 105.3 15.8 3.5 54.5 2000.1 4822.5 258.3 5080.8 3080.72003 579.6 161.6 23.5 3.5 81.1 822.2 992.6 474.3 1466.9 644.62004 0.0 161.6 33.1 3.5 114.2 275.8 0.0 474.3 474.3 198.52005 0.0 161.6 33.2 3.5 114.5 276.2 0.0 474.3 474.3 198.12006 0.0 161.6 31.0 3.5 107.0 268.6 0.0 474.3 474.3 205.72007 0.0 161.6 32.8 3.5 113.2 274.8 0.0 474.3 474.3 199.52008 0.0 161.6 33.2 3.5 114.5 276.2 0.0 474.3 474.3 198.12009 0.0 161.6 33.5 3.5 115.6 277.2 0.0 474.3 474.3 197.12010 0.0 161.6 33.2 3.5 114.5 276.2 0.0 474.3 474.3 198.12011 0.0 161.6 33.4 3.5 115.2 276.8 0.0 474.3 474.3 197.42012 0.0 161.6 33.4 3.5 115.2 276.8 0.0 474.3 474.3 197.42013 0.0 161.6 33.4 3.5 115.2 276.8 0.0 474.3 474.3 197.42014 0.0 161.6 33.4 3.5 115.2 276.8 0.0 474.3 474.3 197.42015 0.0 161.6 33.4 3.5 115.2 276.8 0.0 474.3 474.3 197.42016 0.0 161.6 33.4 3.5 115.2 276.8 0.0 474.3 474.3 197.42017 0.0 161.6 33.4 3.5 115.2 276.8 643.1 474.3 1117.4 840.52018 0.0 161.6 33.4 3.5 115.2 276.8 1243.4 474.3 1717.7 1440.82019 0.0 161.6 33.4 3.5 115.2 276.8 5637.8 474.3 6112.1 5835.22020 0.0 161.6 33.4 3.5 115.2 276.8 1426.8 474.3 1901.1 1624.22021 23.6 161.6 33.4 3.5 115.2 300.4 1036.1 474.3 1510.4 1209.92022 33.2 161.6 33.4 3.5 115.2 310.0 4698.1 474.3 5172.4 4862.42023 306.6 161.6 33.4 3.5 115.2 583.5 742.5 474.3 1216.8 633.32024 1477.1 161.6 33.4 3.5 115.2 1754.0 0.0 474.3 474.3 -1279.72025 562.1 161.6 33.4 3.5 115.2 839.0 0.0 474.3 474.3 -364.72026 306.6 161.6 33.4 3.5 115.2 583.5 0.0 474.3 474.3 -109.22027 1453.6 161.6 33.4 3.5 115.2 1730.4 0.0 474.3 474.3 -1256.12028 529.0 161.6 33.4 3.5 115.2 805.8 0.0 474.3 474.3 -331.52029 0.0 161.6 33.4 3.5 115.2 276.8 0.0 474.3 474.3 197.42030 0.0 161.6 33.4 3.5 115.2 276.8 0.0 474.3 474.3 197.42031 94.8 161.6 33.4 3.5 115.2 371.6 0.6 474.3 474.9 103.22032 422.4 161.6 33.4 3.5 115.2 699.3 125.9 474.3 600.2 -99.12033 57.4 161.6 33.4 3.5 115.2 334.3 206.5 474.3 680.8 346.52034 183.4 161.6 33.4 3.5 115.2 460.2 0.6 474.3 474.9 14.62035 386.7 161.6 33.4 3.5 115.2 663.5 124.4 474.3 598.7 -64.92036 50.6 161.6 33.4 3.5 115.2 327.4 250.1 474.3 724.4 396.92037 0.0 161.6 33.4 3.5 115.2 276.8 643.1 474.3 1117.4 840.52038 0.0 161.6 33.4 3.5 115.2 276.8 1243.4 474.3 1717.7 1440.82039 0.0 161.6 33.4 3.5 115.2 276.8 5637.8 474.3 6112.1 5835.22040 0.0 161.6 33.4 3.5 115.2 276.8 1426.8 474.3 1901.1 1624.22041 0.0 161.6 33.4 3.5 115.2 276.8 1036.1 474.3 1510.4 1233.52042 0.0 161.6 33.4 3.5 115.2 276.8 4698.1 474.3 5172.4 4895.52043 0.0 161.6 33.4 3.5 115.2 276.8 742.5 474.3 1216.8 939.92044 0.0 161.6 33.4 3.5 115.2 276.8 0.0 474.3 474.3 197.42045 0.0 161.6 33.4 3.5 115.2 276.8 0.0 474.3 474.3 197.42046 0.0 161.6 33.4 3.5 115.2 276.8 0.0 474.3 474.3 197.42047 0.0 161.6 33.4 3.5 115.2 276.8 0.0 474.3 474.3 197.42048 0.0 161.6 33.4 3.5 115.2 276.8 0.0 474.3 474.3 197.42049 -917.8 161.61 33.4 3.5 115.2 -640.9 -9169.3 474.3 -8695.0 -8054.1

Not Present Value at 10% discount rate: B 2,142 million

Equalizing dicount rate: 16.27%

-95-

Annex 24

TLAND

Lam Takhong Pump Storage Project

List of Documents in Project File

Environment

1. Environmental Impact Assessment of Lam Takhong Pump Storage Project- Khon Kaen University, March 1992

Volume 1-2 Summary ReportVolume II Environmental Impact AssessmentVolume III-2 Recommended Environmental Impact Mitigation Plan and

Monitoring ProgramVolume IN" Environmental Economic AnalysisVolume V Appendix

2. Implementation Plan: Environmental Mitigation and DevelopmentLam Takhong Pump Storage Project - Office of the Environmental Policy and Planning,January 1994

3. August 1994 Addendum to The Implementation Plan: Environmental Mitigation and Development -Electricity Generating Authority of Thailand

4. Public Participation Meeting - Electricity Generating Authority of Thailand, March 1993 (in Thai)Technical InformationEnvironmental Information

5. Executive Summary: Lam Takhong Pump Storage ProjectEnvironmental Assessment - Electricity Generating Authority of Thailand, June 1994

Technical

1. Feasibility Study on Lam Takhong Pump Storage Development Project -Japan International Cooperation Agency, November 1991

2. General Information: EGAT Power Development Plan, Revised PDP 91-01(1) -Systems Planning Department (EGAT), September 1993

3. Project Implementation Plan - Electricity Generating Authority of Thailand, September 1994

4. Economic Analysis of EGAT's Investment Program - Electricity Generating Authority of Thailand,August 1994

5. Economic Analysis of Lam Takhong Pump Storage Project - Electricity Generating Authority ofThailand, September 1994

CHARTS

THAILANDLAM TAKHONG PUMP STORAGE PROJECT

ELECTRICITY GENERATING AUTHORITY OF THAILANDOrganiatIon Chart

IGENIERAL MANAGER||O ON MANENAVA

AM~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A

I POL cr | i AMoi I ' -X Ifoo POW f" &t-wm s l' l

| ptXNNG | | FlOCEAM=1TIO |FT OfTIN- | YTU NINEIG| OSRUTT | MNN

I~~~~~~~~~~~~ Fm lx MTNBU x PCRI

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90 HE E~~~~~~~~~~~~~~~~~KU

EGAT Organization for Design of Lam Takhong

Superntendent, Lam TakhongPumped Storage Project

.I................................................I....... ............................................Assistant Superintendent, Lam Takhong

Pumped Storage Project C

Specification Ecology CoordinationSection

................ .1. . ......... ....................... ......... ............ I..................... ............I.........I............. ....... I......... .... ........... .................... ............. ......... 1......... L Information Survey and Civil Engineering . Electro-Mechanical | Project CoordinationStudy Division Division Engineering Division I Division

Geographical Survey Structural Engineenng Electcal Engineerng Coordination ReportSection j Section . secton Section

Construction Materials technical Engineering Mechanical Engineering Bidding Documents andSurvey Secti Se 6 on Secfon Contract Section

Geochnical Survey Hydraulic Engi eering Control System Engineerng Cost Estmate and BudgetSection 1 Section . Section j Section 1Architectural Design

Section1

EGAT Organization for Construction of Lam Takhong

Hydr* Power ConstructionDepartment

Lam Takhong PumpStorage Project

Consulting Engineer

{ Generai Construction Generatorinstalation I Turbine InstallationProject Section Project Section Project Section

.......... - ............ .... . .J.1..... I. .. . .. . .. . ... ..................I.................... . . .... ........... - - - --- - - -- - . . . 1 - - - - -- - . . . . .. . . . . . . - . . . . . . . . . . .Engineer Civil Electrical Mechanical Administration Const. CoordinationProject Division Project Division Project Division Project Division Project Division Project Division

.............. I.................. , .1.................. ,I1.................. ........................ ... ........-........... 1........... .............. .......Fiekd Engineer | * GeologY Control System - Inst. ! Hydraulic Instlltion Account & Treasury Coordination & Report Legal & Public RelationProject Section Project Section Project Sject Sectioect Sectin Project Section Project Section Project Section Go..................... I---- ............... ........ . ..... .............. ........ . ...... .............. .................... ............................... I............. ................... I ............................. ...........................................Survey A - Laboratory Reservoir- Construction High Vol. Equipt & Disbursement Checking Resettlement & . Safety & SecurityProject Section Project Sectin Communication Sys. lnst Project Section D. cupation Extension Project Section

Project Section Project Section

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-99-

Organization for Implementing EnvironmentalMitigation and Rehabilitation

.... ........ ..... .. .. ..... .. ....... . ........ ...... ..

Sub-Committee for Public Relation

Sub-Committee for Property SurveySi Khu District

Sub-Committee for Property Survey- Pak Chong District

Sub-Committee for Verificationand Remittance of Comensation

-Si Khu District

The Committee for Sub-Committee for VerificationMinister of the Prime Ministers Consideration of Assistance to - and Remittance of Compensation

Office the Affected People andPak Chong DistrictEnivironmental Development Pak____ Chong____District____

: _ _ _ _ _ ~~~~~~~~~~~~~~~~~~. . . . . . . . . . ......... .............................. .

Sub-Committee for Quality of LifeDevelopment and Occupational

Promotion,

The Cooperatives PromotionDepartment

............ .... ........

Department of Fisheries

The Royal Forestry Department

The Royal Irrigation Department

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EGAT Pumped StorageHydroelectric Project

Office of the National Economicsand Social Development Board

Office of the EnvironmentalPolicy and Planning

LAM TAKHONG PUMP STORAGE PROJECT (Implementalion Schedule) Page I

1994 1995 1996 1997 1998 1999

ITEM/ACTIVITY N D A I i AM A S 0 N II) J F MA A MA J J AJ AAI A S 0 N 1) J F MA A MI J A S 0 )IF IAA J A S ()N D) J F IA A MA J I A S 0 N 1)

MANCVL WORKS_

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Contract Award

Construction

Int structure - - 1- -- - - - - - - - - -

LAM TAKHONG PUMP STORAGE PROJECT (Implementation Schedule) Page 2

1995 1996 1997 1998 1999 2000

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TURBINE-GENERATOR & POWER

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Tcsting & Commissioning

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Unit 2

HYDRAULIC EQUJIPMENT

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Contract award

Dr-sign, manufacturing & transportatin

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LAM TAKHONG PUMP STORAGE PROJECT (Implementation Schedule) Page 3

1995 1996 1997 1998 1999 2000ITEMIACTIVITY J IFIMIAMIJ IJ JAS OINIDIFI FMIAM I AISJOINIDJIF FMIAIMJ 1)JI ASOINIDI] IFM AIMJ J AISJOINIDJIF MA MIJ J JAIS1N DJIF FMIAIMJ I ASO0N D

ELECTRICAL SYSTEMSI II IIIIIIIIIIII

Bid documents

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Contract award ___________11

Installation

Testing & Commissioning

Bid documents___________1Lllll iiii iiiii llllI

Cotrc Iaward 49liA fid SftlInstallation ___________1

Testing & Commissioning ___________11

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