THE WORLD BANK GROUP ARCHIVES

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Folder Title: Volta Expansion Project / Volta Power II - Ghana - Loan 0618 - P000836 - Correspondence - Volume 2

Folder ID: 1607976

Project ID: P000836

Dates: 10/01/1973 – 11/17/1977

Fonds: Records of the Africa Regional Vice Presidency

ISAD Reference Code: WB IBRD/IDA AFR

Digitized: 3/23/2018

To cite materials from this archival folder, please follow the following format: [Descriptive name of item], [Folder Title], Folder ID [Folder ID], World Bank Group Archives, Washington, D.C., United States. The records in this folder were created or received by The World Bank in the course of its business.

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THE WORLD BANK Washington, D.C. © International Bank for Reconstruction and Development / International Development Association or The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org

GHANA Loan 618-GH Vol. II

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RECORDS CENTE ROD! 60 I J_; Box No, '1 -

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a .......:.\:I've~ R197B-020 Othe: 0.818. P000838. ~I Ghana. Loa . p wer 11 • ·, ·ect / Volta o ·on ProJ 2 'olta Expan! ~ce • Volume :orrespond

DECLASSIFIED WI1JJ 1<: ESTRICTIONS

WBG Archives

FORM NO. 635 ( 6 - 77) CLOSE - OUT SHEET

This file is closed as of 11/,?'v , V! I~? 7 i . . I I

For further correspondence, please see __ .,_L,1..,../ _,( __ IL.J/-1-f-~----

RECORDS MANAGEMENT SECTION

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FOR MUNT HAL I FOLL OW I NG CABLE HAS B EE N S ENT TO DAY T 01" MI NIST RY O F o t. &, V\.. c~ r1... l./\l / b 0

FINANCE QUOTE WISH TO INFORM YOU FOLLOWING SERVICE P YMENTS WILL (' ( G:, ~ c.._ Uc, G--. b ( "8

BE DUE DECEMBER 15: CREDIT 205 EASTERN REGION COCOA US DOLLARS

26,195; CREDIT 594 SECOND HIGHWAY VS DOLLARS 31;019; CREDIT 163 ·. '

FISHERIES US DOLLARS 3;036; CREDIT 499 II WATER SUPPtY US DOLLARS

22,439; CREDIT 500 LIVEsrocK us DOLLARS 2,01 s; CREDi f 531 ·oIL PALM

PROJECT us DOLLARS 3,949; CREDIT 160 ·us DOLLARS 14,887;, CREDIT

S007 'HIGHWAY ENGINEERING US DOLLARS 98,375.55; LOAN 1122

TELECOMMUNICATION US DOLLARS 85,987, NETHERLANDS GUILDERS 20,832,

DEUTSCHE MARK 16,228, SWISS FRANCS 9567; LOAN 1181 A, HANTI COCOA

US DOLLARS 58,338, NETHERLANDS GUILDERS 83,784; POUNDS STERLING

2429.48, JAPANESE YEN 643,950, ·DEUTSCHE MARK 39,235, SWISS FRANCS

38487; LOAN 618 VOLTA RIVER PROJECT US DOLLARS 18,506; CANADIAN . I

DOLLARS 13;422, INDIAN RUPEES 339, NETHERLAND GUILDERS 54,230, . I POUNDS STERLING 921:06; ITALIAN LIRE 4,944,391; JAPA ~ESE YEN

22,632,427; DEUTSCHE MARK 56 ) 151; SWISS FRANCS 92,73~; IRISH

POUNDS 683.83j LOAN 1182 SECOND HIGH WAY PROJEC T US DJ LLARS 66,825~

I KINDLY ASCERTAIN IF PAYMENT INSTRUCTIONS ISSUED. REGARDS,

~Ex\ VITAGL I ANO, UNQUOTE ' I

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Wes t ern Africa Programs 1a

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cc: Mr . Blinkho r n Mr . i~e g a yehu

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Dear Mr. Lithgow:

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September 12, 1977

Ref: GHANA - Volta River Authority System Operation Problems

-·

We have reviewed the draft of your report on the VRA outages and your conclusions. We find your analysis of the events quite clear. Thank you for having attached VRA's internal logs covering the outages; these logs were particularly interesting for us in judging the problems VRA is facing in Akosombo.

After examining the outage logs we have the impression that a number

·-·

of problems have surfaced in Akosombo as a result of the accidents. It appears that the maintenance of the protection equipment and circuits (including the control circuits) is not up to the same level as the care taken with the large equipment. This situation, which is quite frequent in power utilities, will have to be improved if VRA is to avoid further embarrassment. We think that the best way to tackle the problem is to bring in somebody from outsid~ to help VRA's engineers for 3 or 4 months in setting things right. A protection engineer from a larger US or European power utility, could go over the protec­tion and control circuits in Akosombo and Volta Substation to make sure there are no wrong or loose connections, and to establish rigid check-up and main­tenance procedures and routines. This engineer could also check the relays settings in order to ensure proper coordination of the protection and correct trippings. We plan to suggest very diplomatically this approach to VRA.

Sincerely yours,

J.A.C.Q{Jy PrOnoveau AcaChief

Energy, Water and Telicouununications Division Western Africa Regional Office

Mr. John C. Lithgow Peppercorn Lane Kemcrton NR. Tewkesbury GI 20 - 7 JL Gloucestershire England

cc. Messrs. Sheehan (CPS) Clift (Chief, WAlDB) Abdi (WAlDB)

APosada:cs

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September 2, 1977

Dear John:

We have received your draft of the vr...A power failures report "'-"h ich has been typed and copies riven to Dick Sheehan and Alfonso Fosarln, both of ~-ho.~ ·~ere on vacat:ion at t he time . Posada is now back an<l expects to discuss your findings tJith Dick as soon as he returns (probaLly next we.ck). I am acnding you, attached , a typed copy of your draft report. 1.L You will henr either fro:ri Sheehan or ?osada about their co~ o.nts. \~ cJ\ ·

Based on you~ report, my conclusions in relation to electrical failures at the generating end are that after an incident occutted (probably sabotage), a nurkcr of ~alfunctions of the protection and communication sys­tems took place due to either defects in equipment, wi.riu.g, dust or other factors product of inadequate m.aiutenance which had not sho,m up before during normal ope.rations. If that. is the case. we should recommend that a eyet~t!c method of protection testa of these systems should be established after a complete revision of both the protection system and communication. system is done by experts. knyr.iay, this will be de.cided after Sheeban and Posadn agree. on the diagnosis.

I run letiving in two days for a mission to Surma and for the Horld Enerey Conference in Istanbul and Yill be back in Washington at the end of the 1onth.

}fr. J o'm Lithgow "T JIS:\"f:. :;,\ 11

Perpercorn t:me Kcmc;rtou i ;"i~. Tewkesbury CI 20 7JL Clou.::eG ten;:dro L ·:GLA:'l°D

GllA-i.VRA cc: ~. _Posada RESalijrt: meg

Sincerely yours.

Ranato B. Salazar 1

-Div1.sion Chief Energy, Water and Telecot:imunications Division

West Africa F~~ional Office

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KNOW POSITION REGARDING LOAN EFFECTIVENESS STOP OTHER DEVELPMENTS

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AGREED BAKS MISSION ARRIVE MOND AY AS REQUES TE D STOP REGARDS

KALITSI VOLTA

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FOR JANET CORDERY . PLEASE RELAY TO MR. LITHGOW BEFORE HE LEAVES FOR

GHANA THE FOLLOWING TERMS OF RERENCE. QUOTE YOU SHOULD PROCEED TO I

ACCRA ON OR ABOUT AUGUST 9, 1977 FOR A PERIOD OF FOUi OR FIVE DAYS TO

ASSESS THE ELECTRIC POWER SITUATION. AS SOON AS POSSIBLE AFTER YOUR I

RETURN TO ENGLAND YOU SHOULD SUBMIT A REPORT TO ME C1VERING YOUR FIND

INGS. IN PARTICULAR YOU SHOULD TRY TO FIND OUT COLO! FIRST, WHAT

HAPPENED TO THE AKOSOMBO POWER SYSTEM, DES~RIBING IN (HRONOLOGICAL

ORDER THE FAILURES TO THE TURBINES, GENERATORS, SUBSTATIONS, AND ANY I

OTHER EQUIPMENT INVOLVED INCLUDING .THE EXTENT OF MALFIUNCTION OF THE

CONTROL AND/OR PROTECTION DEVICES. THE VIEWS OF VRA,I VALCO, AND THE

MANUFACTURERS REPRESENTATIVES SHOULD ALSO BE OBTAINED. SECOND, WHAT I

REPAIRS WILL BE NEEDED TO RESTORE FULL SERVICE, AND HOW MUCH TIME IS I

INVOLVED. THIRD, HOW MUCH WILL THE REPAIRS COST. YOU SHOULD ALSO TR 1

I 0 ESTIMATE THE LOSS OF REVENUE TO VRA AND THE LOSSES IN PRODUCTION

Y VALCO. BEST REGARDS SALAZAR UNQUOTE

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SUBJt C 1 r OT TOE: E.. 1 .. /\N..,'VI I TED

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GHANA PO~JER CLEA.11/\Nl U, ,\!\JU Ct JI') l)!ST llBUTION.

leared and cc: Mr. Slinkhorn Mr. Sheehan

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FOR KALITSI. BANK PROPOSES BRIEF MISSION CONSISTING OF I

LITHGOW TO PROCEED ACCRA QUICKLY AS POSSIBLE TO ASSESS I

AKOSOMBO PROBLEMS. YOU MAY RECALL LITHGOW PARTICirATED

ORIGINAL AKOSOMBO APPRAISAL AND IS FULLY FAMILIAR rITH

BACKGROUND. IF YOU AGREE HE WOULD BE PREPARED TO [RRIVE

ACCRA NEXT SUNDAY OR MONDAY AUGUST 7 OR 8 AND STAY FOR

TWO OR THREE DAYS. PLEASE . CABLE URGENTLY IF THIS !MING

CONVENIENT SO THAT WE CAN MAKE APPROPRI~TE ARRANGE ENTS.

REGARDS, BLINKHORN

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·· TBlipkhorn:jt /; f) AUTflOfllZ[L) i./,/ /:/. f,./1,,<9')'11 :(J.;//.fr"'/.~-. TBLINKHORN, SR. ±;c\{N OFFICER l'

cc & cleared with: Mr. Posada JLIMnr 1t 1" 1

c c : M e s s r s • C L i f t , S a L a z a r , W E S T E R N A F R I C A P R O G R A M S __ I _ __ ·-R. Sheehan, M wine, Ms .Vita g Li an o ·1r\'.1,;.',; 1,\1 ,\un 'C, L -~;:_c:~~~~---~-'

CLEAnANUS AND COPY D ISTF, IBUT ION

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Mr. Rainer B. Steclchan, Acting Director. WAIDB. July 27, 1977 _ ./ . r r C.,Q,M. ~\H

T:1on .:is A. Dl i :'11~lto rn, S r .1.o,.n Office r , !:AI D>f ·- '-"--------... ---..... --. (through Arnold Clift, Division Cb ief, WAIDrl) GHANA - Volta River Authority, Akosombo Hydro Plant Problems

1. Serious mechanical problems have developed in the generating units of the Volta River Authority's (VRA) Hydroelectric plant at Akosombo. On July 4 and again on July 6, the entire system collapsed , causing a complete but temporary loss of power. The problems have been identified and r epair work is underway. Four of the six units are opera ting but it will t ake some time before the system can be restored fully to normal operation. While a comple te assessment of the damage has yet to be made, it is already clear that sisnificant financial losses have been sustained by the VRA and its main customer, the Volta Aluminum Company (VALCO). ~ a result the financia l assumptions and projections developed for VRA in connection with the recently approved Kpong hydro project w1.ll have to be re-examined. Following is the background of the problem, based on recent discussions in Accra with VRA officials.

2. The Akosombo hydro plant, located about 100 km northeast of Accra on the Volta river, and associated transmission facilitiee were financed in part by Bank loans ( 310-GH for US$4 7 million in 1962 and 618-GH for liS $6 million in 1969). The plant consists mainly of a six unit powerhouse ; four of the units were commisoioned in 1966, two in 1972. With a tocal installed

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".:"'!:' ., "."fty ,.,f' ()1 ':'! Mf,T_ -~ l , n c, 0 M°h') :',-n,,:f,l,-, q "'.T~ t' ~n TH" ... (" "'Tif:: rd" ,..,,_.,'!'~'Cl! requirements and, in addition, supplies power to Togo and Benin. ·. "' "'~

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·3. In the course of normal maintenance by VRA engineers, it was discovered that serious cracks had developed in the turbine rings on the number three and four generating units, and mi nor fissures in all of the rings on t he other turbines. In addition, the generator coil on one of the wiits was found to be bent, VRA in late June cabled the respective manufacturers (Hitachi for the turbines; Canadian General Electric for the generators) to send technical advisory teaws to assist in the repair work. The· Japanese r~sponded i mmediately ; a team of experts arrived within a week. A representative of the Canadian~ arrived July 16. · · · · ... : >

4. · The plan was to take number four unit out of service first, weld the crack in the ring, put it back into operation and then start repairs on the remaining \lllits, beginning with number three. However, for some as yet unexplained reason, two units, in addition to the non-functioning number four, stopped working in the late afternoon of July 4 ; the remaining three units

· could not hold and the system collapsed. It took about two hours to restore power through four units. A similar total collapse occurred again two days later.

5. Compounding the technical problems at Akosornbo were political/social disturbances throuBhout Ghana, including a widespread strike of professional groups. among them Ghanaian engineers. VRA management ne ftotiated with the

. authority's engineers throughout the weekend of July 2-4 in an attempt to _pereu~de t hem not to join in the stri~e. The engineers were adamant, however,

. ...,..----~--~d ~agree1d' 'only to prov-i de a skeleton team of Ghanaian engineers to work w1.th · ·the Japanese technicians.in the repaiT. The vast majority of VRA engineers,

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an usti.k;iteJ 40 or s o, J oi r,e <l in t '.1e strik~. Addi ng f urthe r to t h~ Vn.A ' s troubles were a series of failures at key tranformer centers (Kumasi, Cape Con,l t , Ac.:11;,,o t a in A-::cra) o n J uly 12 and 13. ~J, i:JU1l.-l ) ,Ci11en t said tha t tho :~~ ..... .......;1 t.r.::.:.::LJ.i:-.. :;;r L:i.d t.c ... ,1 ~ l o-.;n up , .::ipp:.11:-..atly \1l t:1 a p.:! trol bcL;L . T~1e other transformers seemed to have experienced mechanical problems of an undetermined nature, although there was some suspicion of sabotage, ·particularly in the case of Cape Coast.

6. VRA had put all of its customers on notice in late June that there could be some interruption in power supply while repair work proceeded. However, total collapse of the system was not anticipated and one major casualty was the VALCO aluminum smelter at Tema, VRA's largest customer. There, three of the five potlines had to be taken out of operation because of insuff:i.c.ient pm-1er. VALCO estimated the loss at about US$5.0 million. It takes about 21 days to clean out the insirle of a non-flII'lctioning aluminum pot and an additional three months before it can be restored to peak capacity, assuming sufficient power is available.

7. VRA roughly estimates that plant repairs, and loas of revenues from VALCO, could total at l.ea..~t US$2.0 ndllion. Repair work is expected to t:2.ke another two to three months but it is said that this will only be temporary and that brand new rings will have to be installed on all u..'1.its by 1981. In the meantime, VRA has requested Ontario Hydro, which had assisted in the tra1n1ng ox Vi{A statx in the ~~bu ' s and witn the establishment or many existing systems, to send a special team immediately to recheck the security of the entire system, co attempt co pinpoint causes oi certain unexplained iailures and to propose better fail-safe devices.

,f •. · . ..,,

Recommondat1on ,,, • y

8. Because of the Bank's long involvement with VRA, through the financing of Aksombo and now with Kpong, and our interest in maintaining both the plant and the institution as strong viable instrummta in Ghana's development, it is recommended that a technical expert from the Bank be asked to go to Ghana as quickly as possible for a complete technical assessment of the difficulties. It is further recommended that in the fall of this year, after repair work is completed and the full extent of damages can be ascertained, a full supervision mission, including especially a financial analyst, go to Ghana to provide a full review, particularly the financial/tariff implications.

cc: Messrs. Chaufourniar Steckhan Salazar Clift Koppen Munthali D. Sheehan Posada Alber D. King

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Cables VOL TA. ACCRA

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Your Ref. REGISTERED AIRMAIL

P. 0. BOX M77.

ACCRA.GHANA

Date. 25th July, 1977.

International Bault for Reconstruction and Development,

1818 H Street, N.W. Washington 25, D.C., U.S.A.

Dear Sirs:

NOTICE OF FORCE MAJEURE - POWER CONTRACT

In accordance with Article 26(G) of the Power Contract between VRA and VALCO as amended we hereby give notice that there was a power failure at the V.R.A. Po we r Station (Akosombo) leading to an interrup­tion in the transmission of power to VALCO on the 6th July, 1977. This power failure was caused by force majeure within the meaning of Article 26 of the Power Contract. We regret the situation and are making every effort to rectify it.

Yours faithfully.

(E.A.K. Kalitsi) AG. CHIEF EXECUTIVE

Please acknowledge receipt of this Notice by signing and returning the attached copy of this letter.

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200 FOR CLIFT BANK OF GHANA INFORM ME TODAY THAT PAYMENTS

( ~· INSTRUCTIONS

HAVE NOW BEEN ISSUED FOR ALL THE SERVICE PAYMENTS LISTED VITAGLIANO . ./

CABLE 209 STOP PLEASE INFORM SOONEST IF ANY AMOUNTS STILL NOT

RECEIVED REGARDS MCGIBBON

COL 200 209

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Distribution : / URWT HL GHAA 123

ACCRA 123/117 29 0810 G; Mr.Cl~ . ~ c,t;,_"-t"..-o--l r, ks. c~·:: sv

l) June 29 77

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INTBAFRAD

VASHINGTONDC

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198 FOR VITAGLIANO PRIMO REURCAB 209 CONCERNING OUTSTANDING SERVICE

PAYMENTS ON GRANA LOANS AND CREDITS PAYMENT ARRANGEMENT BEING MADE

BY BANK OF GHANA REGARDING AMOUNTS MENTIONED IN YOURCAB EXCEPT UNDER

LOAN 618-GH AND WE WILL CABLE DETAILS TOMORROW STOP REGARDING LOAN

618•GH COMMA VRA STATE THEY HAVE

. ..COi 1 ag __ .?~ C l 8 -; •• •· - • • ·_r .. i;.~-:-::..-~ .. -~ .. :'"!-:i:.•'l.,..,....~.--.. • .. · - 4"'t;•fr

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nECEIVED ADVICE FROM MORGAN GUARANTY NEW YORK DATED JUNE 15

ATING PAYMENT WAS MADE TO IBRD ACCOUNT SECUNDO YOUR MEMO TO

BLINKHORN

JUNE 23 AND 160-GH COMMA 531-GH NOR LOAN 618•GH WHICH WERE

MENTIONED

IN YOURCAB STOP PLEASE CONFIRM IF AMOUNTS UNDER THESE CREDITS AND

LOAN

PAID COMMA OTHERWISE ADVISE STATUS REGARDS

0 MUNTHALI

COL REA~ P2 CHK 67 23 20 57-GH 160-GH 531-GH 618-GH

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FOLLO WING CA BLE SENT TODAY TO MINFIN QUOTE REF 10VERDUE ~ r~) · c. l. 6 V..~(~ {.;\ ">

ACC RA, GHANA

SERVI CE PAYMENTS.FOLLOWING PAYMENTS ON IDA CREDITS AND

BANK LOA NS DUE JUNE 15, 1977 NOT YET RECEIV ED AAA ciEDIT

S-7-GH DOLLAR S 98 ,776.5 5; CREDIT 160-GH DOLLARS 14,887; I

CRED IT 163-GH DOLLARS 3,036; CRED IT 205-GH DOLLARS 23,426; I

CREDIT 499-GH DOLLARS 18,335; CRED IT 500-G H DOLLARS 1,834;

CREDIT 531-GH DOLLARS 3,519; CREDIT 594-GH DOLLARS )8 ,392. I

BBB LOAN 618-GH INDIAN RUPEES 1,019; LOAN 1122-GH DOLLARS !

86,175,NETHERLA ND S GUILDERS 20,'832, DEUTSC HE MARK 9,,115,

SWISS FRANCS 6,901; LOAN 1181-GH DOLLARS 60,150, POUND I

I STERLING 2,134, DEUTSCH E MARK 22,946 SWISS FRANCS 25,086;

I LOAN 1181 - GH - DOLLARS 66,825. ON LATTER LOAN DOLLARS 675

I WERE DUE JUNE 8. GRATEFUL IF YOU COULD CH ECK INTO STATUS

AND CAB LE SOO NEST REGARDS UNQUOTE VITAGLIA NO

, D1STl11611TI()

cc: Messrs. Clift Co/r) Abdi

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]·' B,V~tagli ~ n .o:aqr /J .. I . '.I 1 ' ' ' , ~ ,··}t;t,;;,·lA_ t1Jf;:/;e{~ ~ BVitagliano, _Loan Of ·ffcer

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11·. r,' /I ,1 (", LA~l "' ;\) INSrf!UCT 1Ur,., l\El , •• !,' )t,[ "j I ' "-r, )

C Ir!;' ! '.,1•rv LT JUNE 17 , 1977_ 1 I.:> Mn.:_ _ giis s111 . ~

I .·-r- -- --- - (/lr 'J .. '•lt,,,, ~- t: ____ Tl/ -S- 1'-__ -r:/- ( "1"~ _J ______ _

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Ce- Cn.,.,~o. 1-c.e,,.,llS2 G cl~ I' ( c. G~,(,{_ "-.o~ b 1 '8 \.5-V\.C~ -

MINISTRY OF FINANCE c.c G---l"c,._"-r,_ - C-\ / bO ~,__ G.f..__(,~r ... l'\.O(~ .. , u 2,£--- --I...--;- c~ ... l, .. o:-~ C\ - G. 1 (:;,3

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ACCRA, GHANA tc G-L_C:..'v. (; l...r:iO.:.~ t I cl --

~ ( Cl'\ Cv'-' c..._ CA I 5 ( "'' REF OVERDUE SERVICE PAYMENTS 9 FOLLOWING rAYMENTS ON IDA

- t-, (, ~c, , •, .. C.. ~ -.~)

fOR ANA NE-BINFON ______ ___ '

CREDITS AND BAN K LOANS DUE JUNE 15, 1977 NOT YET RECEIVED I

AAA CREDIT S-7-GH DOLLARS 98,776.55; CREDIT 160-GH DOLLARS -. I

14,887; CREDIT 163-GH DOLLARS 3,036; CREDIT 205-GH DOLLARS

23,426; CREDIT 499-GH DOLLARS 18,33i; CREDIT 500-GH I

DOLLARS 1,834; CREDIT 531-GH DOLLARS 3,519; CREqIT 594 - GH

·DOLLARS 18,392.

BBB LOAN 618-GH INDIAN RUPEES 1,019; LOAN 1122-GH DOLLARS I

86,175 ,NE THERLANDS GUILDERS 20,832, DEUTSCH ~ MARK 9f 115,

SW ISS FRANCS 6,901; LOAN 1181-GH DOLLARS 60,150, POUN D I

STER LING 2,134, DEUTSCHE MARK 22,946 SWISS ·FRAN CS 25,086; I

LOAN 1181-GH DOLLARS 66,825c ON LATTER LOAN DOLLARS 675 I

WERE DUE JUNE 8. GRATEFUL IF YOU COULD CHECK INTO STATUS

AND CABLE SOONEST REGARDS INTBAFRAD, VITAGLIANO

I SUBJE-C I -

-- ----CLt-,\n \!'J1"·1.: S '.\r\n r.nry [J'~Tt\iEhY(IC' \J

cc: Messrs. Clift (o/r) Abdi BL·inkhorn l~egayehu

F UHM NO. 27 (5 76)

THE WORLD BANK OUTGOING M.ESSAGE FORM (Telegram, Cable, Telex) IMPORTANT (PLEASE READ INSTRUCTIONS BELOW BEFORE TYPING FORM.)

Class o f Serv1ce: __ L~Ir1-~ ---- Dote:_J_ANUAR L2 7-, _ 19..Ji. _____ _ -l\ Orig,nators Exi. __ 8 '1 '1 8 __ _

THlcx No .: ____ _...~--'- - ----- c....LU,?_

Telex Answerb.:lck ·

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TO MUNTHALI, INTBAFRAD~-----------'- v i'---~ CIT Y/ COUNTHY ACCRA GHAN vr;l~ '-~ MESSAGE -Z,2..., NO.: ....) =--=~ ----,c----------

4

5

6

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8

10

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12

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14

15

16

18

19

20

21 END

OF

22 T EXl

AAA REURCAB 29 REF. UPPER REGION. COMMITMENT CHARGE ACCRUES

FROM A DATE SIXTY DAYS AFTER JHE DATE OF THE LOAN AGREEMENT AS

PER SECTIO N 3.02 GENERAL CONDITIONS BUT BECOMES PAYABLE ON THE

NEXT PAY MENT DATE AFTER BECOMING EFFECTIVE. THIS LOAN IS NOT

YET EFFECTIVE AND THEREFORE THE PAYMENT IS NOT DUE. 888 REURCAB 23

REF. KPONG AND ECG. CLEAN COPIES OF LEGAL DOCUMENTS WERE SENT

TO MR. GYASI-TWUM, THE ALTERNATE EXECUTIVE DIRECTOR, FOR ONWARD

TRANSMISSION TO GHANA BY THE DIPLOMATIC PUCH ON DECEMBER 29. THIS

WAS ADDRESSED TO YOU SO PLEASE CHECK WITH MINISTRY OF FOREIGN

AFFAIRS. CCC REF. LATE PAYMENT VRA-618-GH PAYMENT RECEIVED.

REGARDS, CLIFT.

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Class of S erv ic e :-----"'-'---- -·---- Date: JANUARY 19, 1977 N Originators Ex t : 811 3 Telex o. : _____________ _ _

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COUNTRY A_C~ __ GHANJ.L. ____ ._ c;:,,-:'_ /

MESSAGE

.___,_ _____________ ,r c.,,.,~ ..... c._ .E.l.ec-fu i>1°[> f- .

No.: µ_u,_.......___._._.., UR CAB FIFTEEN JA NUARY FOURTEEN • RECEIVED PAYMENT OF

4

5

6

7

8

9

10

I

1:

12

13

14

15

16

1:

18

19

20

TELECOM LOAN 1122-GH

OVERSIGHT ON PART OF

1 I l J/ 8,.? Lt (_1" vt ~Q. .:::,__,"\..'----

BUT NOT OF VRA 618-GH. 1HERE WAS AN l tjo 4 C-0-Cl,c t...Q_ (._ A- r 1

MORGAN GUARANTEE NEW YORK. THEY HAVE

INSTRUCTED THEIR BRANCH IN FRANKFURT TO MAKE THE PAYMENT

TODAY. WILL LET YOU KNOW STATUS AS SOON AS WE RECEIVE

REPLY FROM FRANKFURT. BBB REFURCAB SIX J~NUARY SIX

REGARDING UPPER REGION LOAN 1291-T-GH NO COMMITMENT CHARGE

IS DUE ON IT AS THE LOAN IS NOT EFFECTIVE. CCC PLEASE

!ENQUIR E STATUS OF KPO NG PROJECT AND ECG THREE PROJECT FROM I

APPROPR I ATE OFFICIALS AND LET US KNOW SOONEST. DDD RIGO,

LAWYER, VISITING GHANA FEBRUARY ONE TO FOUR TO DISCUSS

OUTSTANDI NG LEGAL MATTERS ON KPONG, ECG, UPPER REGION,

ASHANTI COCOA, WATER SUPPLY ETC. REGARDS, CLIFT.

------·--------~ t.: i r o ~ t: , 1 , \ ·I , • ! : r "i . _ D

slJllJECT:-RESIDENT mssroN ~ m,.A.f'TEo -sY-:'#-- · -

LA __ TE_ PAYMENTS, KPONG, ECG_ ARDiwan:cb ____ ~~ CLEAR ANCES AND CCJPY D1$Tl11l3U'T ION: ALJl HOH l~ t. D !:l'I' '· ~'·":1c :nd S1qn., . ; ,

c; · Messrs.Rigo, Wegayehu, \~adsworth, _A.__CL1ft.,. _D1v1s1on. __ Ch e ' - ·­DEPAHTMENT:

Sa Lazar. .W IDB ~-..a-= --~-1

'---------------------..L-.----'~t·.....,·_"_..,.,.,_,,~--~ o.~~~1L-. - .1

O!STnl LlL' flO;\J. '."':H! T 1: - l , ;I.! L~uv CAN ,\H Y Bdl Coov P INK Tr<.111~111111.11 <....,ULULN HUO Ur1u1n .:.i tur cu k..l!t:D

.. ....... "--"'~ -------· ""~-- ........ ....___ -

/ INCOMING CABLE I

ZCZC 248424 RC023 PDD1495 RML9392 UWS191 CAC216 A2239

URWT HL GHAA 137

ACCRA 1.37/133 14 1910

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WASHINGTormc

Jan. 14, 1977 Distribution:

Mr. Clift / Mro Salazar

G-6_.__D--- [00- ) IQ. 2._

v:._k'i1.:::...~ ,~- {._-,j$ -

6-/1 '11A l o , £ 0Q1..... I~ "I I

15 POR BLINKHORN PRIMO REUnCAB UNNUMBERED J ANUARY ELEVEN STOP ~ DING

J TELECOM LOAN EYE HAVE COPY OF A CABLE SENT BY BANK OF GHANA J ANUARY

r ' SIX I t;STRUCT I NG i/:LGEMENE BANK N .. V. AMSTERDAM ~)TO PAY IB RD N TH ERUiNDS ~~

GUILDFRS 20~8 .32 M;o ANCTHEn CABLE TO UNION 3ANt{ StvITZERLAND SAMF.

DATE IilSTRUCT JNG PAYME!H

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OF SWISS FRANCS 3976 STOP REGARDING POWER LOAN AMOUNT DM 56, 151

COMMA EYE HAVE SPOKEN TO KALITSI WHO IS SENDING ANOTHER CABLE TO

MORGAN GUARANTY NEW YORK INSTRUCTING IMMEDIATE PAYMENT STOP VRA

DOES NOT UNDERSTAND WHY AMOUNT NOT YET RECEIVED SINCE COMMA AS

S1ATED IN

MYCABL SEVEN COMMA

p'y AMENT I NS TR UC T IO N

ISSUED NOVEMBER 25 \Hn ?AYMENT ADVICE DATED DECEMBER EIGHT

RECEIVED r OM MORGAN GUARANTY SECUNDO REMYrAB SIX STILL ~WAITING

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21370 GHACOM G

FM FOREIGN ACCRA

TO GHANAEMB WASHINGTON

GW/n9

\

11/1/77 :,·

FOR BLINKHORN INTBAFRAD REPEAT TO MR. GYASI TWUM FROM PRUDENCE

YOUR CABLE 100/92 REFERS STOP SERVICE PAYMENT VRA POWER LOAN 618- GH DM 56 , 151 PA ID BY MORGAN GURANTY 8 DECEMBER 1976 STOP TELECOMMUNICAT IONS LOAN 1122- GH US DOLLARS 85 , 517 PAYMENT CABLED TO FEDERAL RESERVE BANK COMMA GUILDERS 20 , 832 PAYMENT CABLED TO ALGEMENE BANK COMMA DM 6, 571 PAYMENT CABLED TO NOTENBANK FFM COMMA SWISS FRANC 3, 976 PAYMENT CABLED BANKUNION ALL ON JANUARY 6 STOP HIGHWAY CREDIT 438- GH US DOLLARS 14 , 87'1 PAYMENT CABLED TO FEDERAL RESERVE BANK JANUARY 7 STOP DEEPLY REGRET DELAY IN PAYMENT STOP REGARDS ANANE- BINFOH ; ;

FOREIGN ACCRA

NNNN

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GHANAEMB64126 c:1i GHANAEMB64126

21370 GHACOM G

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I ,PO rl\N I (Pl L /\Sf l!I ,,, I ·r l,t lCTIONS [II_L(,W IJl:;I u,iL I) I '

( '. I' 11111• LT 1 ,, J/\tlU/\RY 11, 1977 8115

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l' (.., / ,L:\_\.11• --------r:1 LJ f ) TH A L I ,,. HJT [3 (\ F R A D I

ACCRA, GllAflA. I

. I REURCAB 7 REGARDING OVERDUE PAYMENTS TELECOM LOAN 1122-GH

NETIIERLAND GUILDERS 20,832 AND S~JISS FRANC 3,,.976 AND VRA POl~ER

LOAN 618-GH DM 56,151 STILL OUTSTANDING AS OF JANUARY 10, 1977.

THESE WILL HAVE TO BE REPORTED TO THE EXECUTIVE DIRECTORS IF

NOT RECEIVED BY JANUARY 15, 1977. PLEASE CABLE STATUS SOONEST,

REGARDS, BLINKHORN.

LATE PAYMENTS

CC: Messrs. Clift, Diwan, Uegayehu,

•

ADhrnn: cb . .,-: / . . -~ ~( : '7<'.-.! :-, /!. j ?Z i.~/%A·--i-_

T ./\. BLI}J;(i-!ORN, SR. L0/1.[l OFFICER

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0 START HERE

TO

FORM NO. 27 (5-76)

Class of Service

THE WORLD BANK OUTGOING MESSAGE FORM (Telegram, Cable, Telex) IMPORTAN.,.. { 'LEASE READ INSTRUCTIO S O 'I/ E t: .,.. 'P G RM I

LT \ 1:rt= Date J AN UAR Y _5_ ~1_9_7_7 _____ _ Telex No ·--------------- Originators E • __ 811 5 Telex Answerback

D

IBRD l){

IDA D IFC D 1cs10D

CITY/

COUNTRY l-'-l-.,..__,,_..u.,.;u,____,._,C!..!..l.!.!.!.l------.....,__--------­

MESSAGE NO.:

4

5

6

7

9

10

11

12

13

14

15

16

17

18

19

20

21 END

OF

22 TEXT

,__._,~~~~~~~~S~ENT TO ANA NE-BINFOH TODAY QUOTE REF. OUR

CABLES DECE MBER 17 AND DECEMBER 27. FOLLOWING SE RVICE PAY MENTS

STILL NOT RECEIVED. VRA POWER LOAN 618-GH DM 56,151.

TELECOMMUNICATIONS LOAN 1122-GH US$85,517, NETHERLAND GUILDERS

20, 832, DM 6 , 571 , SWISS FRANC 3,976. ALL AMOUNTS DUE DECEMBER

15, 1976 WILL BE REPORTED TO EXECUTIVE DIRECTORS IF NOT

RECEIVED BY JANUARY 15, 1977. ALSO FIRST HIGHWAY CREDIT

438-GH US$14 , 870 DUE JANUARY 3, 1977 NOT RECEIVED. PLEASE

CABLE STATUS SOONEST UNQUOTE REGARDS, BLINKHORN.

SUBJ CT

- ~-~~ ,ov '~fi•. ~ ,/~~Sr.-Loan Officer

b-ATE PAYME NTS rl~ AFl/ \.,L c- ') ON

Messrs. Clift, Blinkhorn, Wegayehu. WAID~ _,..,.,Tr"F,~....-r,--,...,.........,.

r )IST i BUTIO'IJ WHITE F, "Copy CANARY n,1 Copy Or iJir ator tc t(oei:

0 START

1 t:; 0

CITY/ COUNTRY

MESSAG NO.·

4

5

6

7

p

9

10

11

12

13

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22 TEXT

FORM NO. 2/ (5 76)

THE WORLD BANK OUTGOING MESSAGE FORM (Telegram, Cable, Telex) IM0

' (PL EASE READ INSTRUCT" )RM.)

10 IX ID

C ass o._. Scrv ~e. LT ______ Date ·-c D JANUARY 5 1977 Telex No. ----­Telex Answerback

MINFTN

_____ Orog L-r! /I .:;.-8118 z IJ ~ a~--oa,....._.---b- ,t~. -

(. ~ ~ J/t.t...

<. ~ C/l-. l/3~

CABLES DEC~M-6-ER 17 AND DECEMBER 27. FOLLOWING SERVICE ./

PAYMENTS STILL NOT RECEIVED. VRA POWER LOAN 618-GH DM 56,151. .,/

TELECOMMUNICATIONS LOAN 1122-GH US$85,517, NETHERLAND GUILDERS

20,832, DM 6,571, SWISS FRANC 3,976. ALL AMOUNTS DUE DECEMBER

15, 1976 WILL BE REPORTED TO EXECUTIVE DIRECTORS IF NOT

RECEIVED BY JANUARY 15, 1977. ALSO FIRST HIGHWAY CREDIT 438-GH

US$14,870 DUE JANUARY 3, 1977 NOT RECEIVED. PLEASE CABLE STATUS

SOONEST, REGARDS, BLINKHORN, INTBAFRAD

SUl3JE c~ LATE PAYMENTS

Cleared with and cc: Mr. Blinkhorn

cc: Messrs. Clift, Wegayehu.

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21 fND OF

22 TfXT

FORM NO. 27 (r; 76)

C ass of C,orv ce

THE WORLD BANK OUTGOING MESSAGE FORM (Telegram, Cable, Telex) ORTANT (PLEASE READ INSTRUCT I

Telex No __ _

Telex Answerbac k

1Bf ~

NOT RECEIVED. VRA POWER LOAN 618-GH DM 56,151. TELECOMMUNICATIONS L

LOAN 1122-GH US$8 5, 517 , NE THERLAND GUILDERS 20,832, DM 6,571,

SWISS FRANC 3,976. AS HANT I REG ION C.O_C_O.A. LOAN 1181-GH SWISS

FRANC 7,052. I..,

ACCRA/TEMA WATER SUPPLY AND SEWERAGE CREDIT 160-GH

US$14,887. FISHERIES CREDIT 163-GH US$2,949. EASTERN REGION

COCOA CREDIT 205-GH US$21 , 187. SECOND WATER SUPPLY CREDIT

499-GH US$16,740. LIVESTOCK DEVELOPMENT CREDIT US$659.

OIL PALM CREDIT 531-GH US$691. SECOND HIGHWAY CREDIT 594-GH

US$658. HIGHWAY ENGINEERING CREDIT S/007-GH US$99,102.SS.

ALL AMOUNTS DUE DECEMBER 15, 1976 WILL BE REPORTED TO EXECUTIVE

DIRECTORS IF NOT RECEIVED BY J ANUARY 15, 1977. PLEASE CABLE

STATUS SOONEST, REGARDS, CLIFT, INTBAFRAD.

UB EC

cc:

LATE PAYMENTS

Messrs. Clift, Wegayehu, Blinkhorn.

A Di wan: cb (i/"') (i}f~ 11

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22 TE'XT

FORM NO. 27 (5 76)

THE WORLD BANK OUTGOING MESSAGE FORM (Telegram, Cable, Telex) PO fANT (PLEASE READ INSTRUCT ;::, Bf'LOW 81:; OR[ TYPING FORM.I

IBRD IX) IDA D

Casso' Service: ___ ~L~T- ------- Date DECEMBER 27, 1976 I . IFC D ~ LT.c=r-J(~{ {-t:,-/ -:-;:1cs10 D

Telex No.-------­T e1ex Answerback ·

Orig,~ o,, •·. 4498 ------ ------

U:'ClL"- 613 L CCL'- J !2. IJ... Lo-.....--...___ , , a 1

l.(}._ 1190

c fl.... I t,3 OUR

CABLE DECEMBER 17. FOLLOWING SERVICE PAYMENTS STILL NOT v

RECEIVED. VRA POWER LOAN 618-GH DM 56,151. TELECOMMUNICATIONS V

LOAN 1122-GH US$ 85,517, NETHERLAND GUILDERS 20,832, DM 6,571, I/

SWISS FRANC 3,976. ASHANTI REGION COCOA LOAN 11 81-GH SWISS

FRANC 7,052. ACCRA/TEMA WATER SUPPLY AND SEWERAGE CREDIT

160-GH US$14,8 87. FISHERIES CREDIT 163-GH US$2,949. EASTERN t/

REGIO N COCOA CREDIT 205-GH US$21,187. SECOND WATER SUPPLY J

CREDIT 499-GH US$16,740. LIVESTOCK DEVELOPMENT CREDIT

US$659. OIL PALM CREDIT 531-GH US$691. SECOND HIGHWAY CREDIT V

l

594-GH US$658. HIGHWAY ENGINEERING CREDIT S/007-GH US $99 , 102.55.

ALL AMOUNTS DUE DECEMBER 15, 1976 WILL BE REPORTED TO EXECUTIVE

DIRECTORS IF NOT RECEIVED BY JANUARY 15, 1977. PLEASE CABLE

STATUS SOONEST UNQUOTE REGARDS, CLIFT.

cuBJ CT

LATE PA~ME NTS --[, 1:.ARANCt:

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P A Y ME NT A MOUNT S L I S T E D 8 EL OW H AV E N OT B E E N R E C E I V E._D /• c 11. S' :> ri < Cr j-\..0\. ~"< . •

/ . SECOND HIGHWAY LOAN 1182-GH US$675 DUE DECEMBER 8 AJN D j b/8

"-- Gr '-a"~ c , c o...-US$66,825 DUE ~ECEMBER 15. HIGHWAY ENGINEERING CREDIT S/007-GH

I US$99,102.55. ACCRA/TEMA WATER SUPPLY AND SEWERAGE CREDIT 160-GH

/ US $14 , 8 8 7 .: F I S 1 R I E S CR ED IT 1 6 3- G H US$ 2 , 9 4 9 • EASTERN REGION

/ · COCOA CREDIT 205-GH US$21,187. SECOND WATER SUPPLY CREDIT 499-GH

US$16,740. I

LIVESTOCK DEVELOP~!ENT CREDIT US $659. /

OIL PALM CREDIT

531-GH US$691. SECOND HIGHWAY CREDIT 594-GH US$658. VRA POWER )

LOAN 618-GH DM 56,151. TELECOMMUNICATIONS LOAN 1122-GH US$85,517,

NETHERLAND GUILDERS 20,832, DM 6,571, SWISS FRANC 3,976.

~SHANTI REGION COCOA LOAN US$55,746, POUNDS STERLING 828.91,

DM 8,766, SWISS FRANC 7,052. ALL AMOUNTS DUE DECEMBER 15, 1976

PLEASE CABLE STATUS. REGARDS, BLINKHORN, INTBAFRAD.

t-s_u_8

J_E_cr_:-=L_A_T:- P-AY-MENTS _ ------- ---· -0-~:~:~-:

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US$675 DUE DECEMBER 8 AND US$66,825 DUE DECEMBER 15. HIGHWAY /

ENGINEERING CREDIT S/007-GH US$99,102.55. ACCRA/TEMA WATER SUPPLY ( /

AND SEWERAGE CREDIT 160-GH US$14,887. FISHERIES CREDIT 163-GH I

1us$2,949. EASTERN REGION cocoA CREDIT 2os~GH us$21,187. SECOND

.... WATER SUPPLY CREDIT 499-GH US$16,740. LIVESTOCK DEVELOPMENT

/ CREDIT US$659. OIL PALM CREDIT 531-GH -~sS691. SECOND HIGHWAY

/ .., CREDIT 594-GH US$658. VRA POWER LOAN 618-GH DM 56,151.

1./ TELECOMMUNICATIONS LOAN 1122-GH US$85,517, NETHERLAND GUILDERS

20,832, DM 6,571, SWISS FRANC 3,976. ASHANTI REGION COCOA LOAN

US$55,746, POUNDS STERLING 828.91, DM 8,766, SWISS FRANC 7,052.

ALL AMOUNTS DUE DECEMBER 15, 1976 PLEASE CABLE STATUS UNQUOTE.

REGARDS, BLINKHORN, INTBAFRAD.

. ,

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International Bank for Reconstruction and Development FOR OFFICIAL USE ONLY

DECLASSIFIE

MAY n !1 iUH

WBG ARCHIVES

SecM76-792

FILE COPY

FROM: The Deputy Secretary November 23, 1976

PROJECT PERFORMANCE AUDIT REPORT

Ghana - Second VRA Power Project (Loan 618-GH)

JA--C. i~~Jc f¥c- r Fd.t-Attached is a copy of azem andum from Mr. Weiner with its accompanying

report entitled "Project Perf nee Audit Report: Ghana Second VRA Power

Project (Loan 618-GH)" dated November 23, 1976 (Report No. 1363) prepared in

the Operations Evaluation Department.

Distribution:

Executive Directors and Alternates President Senior Vice President, Operations Executive Vice President and Vice President, IFC President's Council Directors and Department Heads, Bank

This document ha~ a restricted distribution and may be used by recipients only in the performance of their official duties . Its contents may not otherwise be disclosed without World Bank authorization .

I

LC 1 ~ c~. I I~ u ~ \.Cvr)Cl, cJ2.. 25 ~

Mr. Shiv Kapur ,,47/// R. H. Sheehan ~

August 13, 1976

GHANA - Two Draft Proj ct erformance Audit Reports Second VRA Power Project - Loan 618-GH First an Second ECG Power - Credits 118 & 256-GH

Both Audits ere pr pared using the "old" format. Th VRA report mentions the Pr ject Co letion Report in the preface b ta copy of th PCR was not attached to the Au4it Report ; no mention of the PCR wa made in the text nor do any o the state nts in the text r fer pecifically to whether or not the ~C ·may have been the basis for the Audit ob·ervations. In the Project Performanc Audit fr the two ECG er dit, there is no word at all about PCR'd o I nssume they were nev r prepared· perhaps this could be covered by a explanation in the preface.

We have no comm nts of ubst nee on the Audit for th I do have f w point to mak on the Audit for the ECG ere it

VRA loan, but as llows:

1. In para raph 5.2 and in para raph vi. of the summary, th t tement is made that no specific year was mentioned for CG to reach th 8% return. Since the Project A reement did not specify any iven year I do not see how any interpretation could be made other than the fact that the % return was obli atory once th credit was effectiv. The ppraisal eport docs show that th B nk projecten only 7.5% in 1971 and 7.6% in 1972, so from a practical point of vi w, I doubt wh ther we could have claim Ghan ,as ind f ult if they did not reach th % in tho e two year but certainly the stipulated return should been reached by 1973.

2. In paragraph 7.3 the stateme tis de that perhaps so e local organization nd ethods a i tance could h v b en suggested by th Ba~k. I dou t if there is ny sch co pete t sai tance

3.

av ilable in Ghana today - let lon Lhen.

In the conclusions , t he stat ment is de that clo er communication b tween the Bank and the Govermnent could have produced a more practical aporoach durin ne otiations to the problem of e cess staffing and that earlier action by the ank Group could have given supervision mi ion great r fl xibility in as isting ith the m na ement problems. Both of the a statem nt are too fuzzy form to under tand.

\A~' I am attaching our

word changes. Please return copies of the Audit them to me when you

eports which show some su gested are f nished with them.

Attach nts

RRShe han : smo cc: essrs. Baum, ovani

EWT •ilea

. ~"'1la..\ l-otlA'"\ le,\ ~ t ~n{U\tl,.l c..a. \ \ 8"

WORLD BANK/ INTERNATl~/\L FINANCE CORPOflATION

'l ?~' C(2 ,'251.. OFFICE MEMORANDUM

TO: Shiv S. Kapur (Director, OED) DATE: August 10, 1976

FROM:

SUBJECT:

Wilfried P. T~tz (Director, WAP)

Project Performance Audit Reports on Ghana : and 256-GH.

Loan 618-GH, Credits 118-GH

We refer to your memo of August 6, 1976 concerning the amendments to the draft Ghana PPA Reports. We have the following observations :

PPA Report-Credits 118-GH and 256-GH

Para. (viii) in the Summary is an appropriat e statement. However, the conclusion of the statement "only a reconnaissance study ... decided not to press the merger" is not contained ju the main text and therefore the reference in 2.5 to the study of the merger would seem to requi re a similar conclusion in the main text. In para. 7.3 the reference to the "three distinct lessons" of which one is "(c) the failure to settle the merger quest~on" should no doubt be removed.

PPA Report-Loan 618-GH to VRA

We no~T £:!.::::l !:1-,a t follo_.;lug a re vi c1v of the wnir.~ cover of the p~o-· posed Third Power loan to \'RA some changes have had to be made in thc:t r epor t in the.presentation of VRA's rate of return performance for past years; the ~hanges also affect t~ e ~r~ Report. Specif ically, the PPA Report (paras . (iv) , summary and 5.03) mer,ticr. .:, a:i. 8% raLe of return on net fi>:ed asseLs as being the target for VRA. Sc::c : .. " ·· 5 .09 of the loan agreement, however, specifies that VRA should achieve: ail v,o rate of r eturn on Governr.1ent invesr,ren:~ ~12. v:=~\, the latter, inter alia , tuking into ac count appropriate revaluations of VRA';, assets. In presenting the case for the VEA Third Power loan, we have i ndicateci that VRA's assets may presently be und ervalued by as much as 80%. If this estim2te is correct, then VRA 's rate of return on equity in 1974 an<l 1975 was only about 2-3%; appropriate changes should therefore be made in the PPA Report.

Conc:J_,.!:.;iut l

There may b;:• c ... ::u points which may arise during the preparation of the two new appraisal reports, and we would therefore like to sug;cst that the t\:o rrl, R2portc :wt be ::. :. t, ... th~ Gl 2:1~ C.,\c:.rrn,,ent until the app raisr,l reports have been fully clear~- - ~~ ~ill let you have the 2dditional information for the PPA Report o~ Loan 0 ·h-GL 6S soon as possible .

c.c: ·Messrs. Salazar (Chic," , ;·..' .. :::11-) Posada (W/,l'Elv) Tiliam (WAP £W) Alber-Gl;:n. ·,: .:ic t t,~., (',;,\.PEW)

JGDavis /DKing :dmb

47 ~h B,t,( fr

? {,.:../ioi ... s;;,._

Mr. Shiv S. Kapur, Operations Evaluation

Francis vanfG~gch, Western Africa Projects

July 16, 1976

OED Performance Audit Reports for Loan 618-GH, Credits 118 and 256-GH

1. This refers to the above two reports transmitted to the Western Africa Region under cover of your memoranda of July 13, in which you state the intention of OED to send the draft reports to the Ghanaian Government and respective project entities on July 20. We herewith request you not to send the draft reports as presently written to the Ghanaian authorities pending discussion of them, particularly certain expositions that are of special concern.

2. In this respect there are attached a brief memorandum and an extract from the Issues Paper for a prospective third power loan to Ghana, concerning the merging of the Volta River Authority and the Ghana Electricity Corporation. As you will see, the Energy, Water and Telecommunications Division has had and continues to have the position that a merger would likely be counterproductive and for this reason it was agreed at the Issues Paper/Decision meeting phase not to take any steps in the forthcoming project to raise the question of a merger, at present dormant.

3. We would like to elaborate further. Going back to about 1972, to which the OED report refers, it may well be that the reports available in the files reviewed by OED did not give a clear picture of the Region's viewpoint. In any event, at that time it became apparent to supervision missions and others in the Region familiar with the situation that a merger of the two utility entities--the bulk power entity, well-operated and virtually autonomous from the financial and management standpoint, and the distribution utility, weak institutionally, with insecure prospects finan­cially and much more dependent on Government--would lead to the lowest common denominator in terms of results. The prospect was that VRA would lose its independent charter and links with VALCO, the aluminum industry, and instead be supervised by a politically oriented board. It was considered that not­withstanding whatever might have been said in earlier years, there existed little basis under prevailing conditions to expect anything else. Accordingly the idea of merging was tabled by the Region. There has been nothing in the recent history to change this perception.

4. In view of all this, the Region does not wish to raise with Government the question of a VRA and ECG merger as an issue. We feel that the OED report in doing so might conceivably cause the Government to initiate action which might well prove unfortunate. We therefore request amendment of the reports before they are transmitted to the borrow r for comment. If you would like any further information or clarification, we would be glad to discuss the matter at your convenience.

DKing:ev Attachments cc: Messrs. Chaufournier, Thalwitz (o/r), Salazar, Pouliquen

I 0:

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I h o.VE! quickly read tl1c abnvc aucJ :i.t repo,ts . J.n \':;_e\; of my ir.:l'dccnt Hc,N; Le:..-~ve (July 19 - August 20 ) Lln,~ the pdority c,f othl'i· work, I do r,ot h:1.vc th'· time to present f.J.ctuul corre>ct:Lons and couPtC'r­c1rgu1!,r:.nU:; on the concl11s:ior1S reached on. key subjects such as r .:itc of return, VIILCO ratC!S, ove.r.st:.ffin~. I ~;ould l:iJ~c, he.Ne ;er , to L.1.1:c. thi~; opportunity to n:,r,ponu briefly to the conclt1sio11s reac.:hcd on the merger question. OED ' s authors clai1n that tl1e BanL (1) l~cked follOi·.'-up en this qucst:Lon (ii) must share the bl ame fo r the ~1eak rcco1maissance study, ( i:li ) held up the r.1ain merger study, and (iv) is .to be blamed [01. m1y detrlrJental r e:su]-t of not having carr ied out the merg0r.

As OED correctly states, the terms of reference ha.cl been substanti.nlly a.greed in mid-1972. However, what was cont emplq.ted was a <le tailed analysis carried out by a t.E:am of experts. A reconnaissai~ce study was never envisaged and came as a complete; surprise. Furthermore,

4

.- thLs reconnaissance analysis turned out to he patently shallow r ecommen­ding a merger ,:md concluding that no further ~ttidies were needed. In fact the whole affair was deeply embarassing· t:o CIDA which had undert2.kcn to finance the study. Therefore , given these circumstances, the lack of any support for a merger by the managers of ECG and VRA and the feeling that. a merger of two relatively mature and diverse organizations could well be a mixed blessing, led the Bank staff, myself include.cl, not to• press this issue further . We do not believe that any detr i~ental effects have resulted which could be attributed to a "non-merger". For our latest assessment of this question please refer to paras. 19-21 o.f our Issues Paper on ECG's III Phase dated December 23, 1975 (copy attached).

I would strongly advise not to send these reports to the Govern­ment until our Region is in a position to comment in detail on all main facts and conclusions as presented by OED.

cc. Messrs. King (Assistant Clift/Blinkhorn Thiam (WAPEW) Posada (WAPEW) Mc.Gibbon (WAGBA)

SAlber-Glanstaetten:cs

•

to the Dir., WAP)~ (WAlDB)

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,.-1 . In 197 ] , ·r ec \,·.:11; C·:j•,·c!•· cl t o U)'l 'J., :1.: \':lli ::11 • :,, 1,! i.,1 v :.,·, . •; 1,'

:tnd t IH' l <' i"o n• bo I ii t liL' J l •1\ ,ind Kl II cn·, 1 .i U; \.'(' ,·c· rc- ! , ·1 , l ,,··, ·; ,.1 , · , '.'•

w h j (' h C n Tl t T :1 :, t. s t () l ! : (• r.10 r (' l1 f; I 1 ;"[ I 2 0 y (. ;1 )" ~ • /\ ,, l' i !" (' 11 ' ' 1 : !"I (. ( ' ! ; j ' : ' ' ' I ' ' ' l :. I :

ch nn g<•c1 <;J .1in,1 Lic:1.l .Ly, e1 1101, ] ouL al th e·~;<' t1•Vl ln an, t.J-r·r,· l ( 0 1·,· :•,')"·· 1 • ; ; ,, ; ,

Were t h ese t 1vc1 lo,11ts r cschcc..lu.ll:ri ov e r 20 yC":<1 s , LC(; 1:,111IL· ;,;•j•., ·,. J L,> tJ . ' .·:11_! ' l l•

meet iu: obllgat"i.on,; on cxi:_;t:iug debt:: b cg.L1:n.i.ng i n .1: 1}f.. 'Jh1· r ,,·., 111· 0., ·,'

pcarecl syinp ;i t heti c toward s s uch 1es c. lH ·duli111> Thc retni L· l ·'t:' r,roi::):,t' I l) ~.,. 1, ~ •, , satisf:1cl.01·y rc vi~:icn of the suhsidia1.y Loi.!H AgrN'.TrLnlio for Llw Hli\ ,1wl )".,; ·, : , dit s ;:i condl Li c•n ()f ncgo.t :l ation~; .

18. Up t o 1 9 ) 3 , ECG carnccl a s a t is f actory r e t.ur n on ne t fi):Nl c1ssf'.t~;. Hc,-.,,--

eve r i n J9 7t, their r e. t urn dr opped t o about 1% ,,lwre it is expc cL ccl to rcr.,.:i,' . l;n·· le ss dra::;t:i.c m0asurcs arc taken .it will stay \~e.1. J below 8% in the fu ture. \'l ,,ti-­vised r:cc and th e Gove rnment t hat 3 s at i s f ac t ory earning per fon:1anc:c wou.l d ; ;we to be r e-es t abli s hed in ord er t o provjd e for a t l east ope r a ting c~penses, ,Jebt sei:vice ;:ind cont dbn t.i ons to i nves tment s . A reasonnble ta r get-year wo ulo uppear to be 1 9 77 , considering -th at (:i.) only a t tha t time will the in c i dc-nce of Joc::i"l.1 cost fin ancing r equi remen ts for the Proj ec t become· i n1po rt ant and (ii) a t ariff incr~ase Ly early 1977 would allow a r e asonable time lag s inc e th e lasl t a r iff incieases in Au gus t 1975. The Governme nt indicat e d, this timing might ma ke a taiiff increase politically more accept able. The magnitude of r e quired in­creases is at present difficult to judge, as in.addition to~CG 1 s own require ­ments - still lo . be studied in detail - it wil\:~rucially depen~ on the p rice at which VRA would supply ene r gy to ECG. Thii J)rice itself de pends on th e cost of VPJt 1 s next large investment, the Kpong hyclroplant a~d on the result of VR.A 1 s discussions on the revision of the basic puwer rate to its other ma in client, VALCO. The Government, VRA and VALCO expect to start negotiation s of this rate in January 1976. ECG is expe cted to try to revaluate fully its assets, which presently are only partially revaJ.ued to take into accbunt the effect of cx~hanRe rate movements on ECG 1 s debt. In its first attempt at this r e'!aluation, il is exp e cted to use the Ghanaian consumer price index despite the distant relationship of this index to the cost of ECG 1 s a~~sets, The outcome of this effort will provide a further basis for determining the rate of return tnrget for ECG whicl1 would be stipulated during negotiations.

The Merger Question

19. : Despite the advici given since the early stages of the Volta Project, that in the long run one organiz-ation be made responsible for generation and distribution, VRA and ECG have now existed side by side for the l;=ist 15 years. The Bank 1 s most ieccnt effort to focus bn this question was reflected in a covenant requirement under Credit 256, requiring the Government, VRA au<l ECG to study the 1 Rationalization of the Power Sector' and implement any suitable recommendations . The resulting study recommended a merger, but .:is the an a lysis did not address the problem in Hny detail, no action was taken. Nevertl1elcss, questions of efficiency ancl economy of the_ present clual set-up remn:in.

,\\

Mr . J{. I\ . I< i 1, l .. l ·- ] ) '< < ·1.JlJL I 1 ' i J I

20 . \)(' :11· 1·,,1··1:i,,, ' t o j,J •11t·:r~· n: !j<')' dr>t'<··· (,- ;><;,'< i], 'i.1,• '" ; . ' (',' i.· 1., ,· t.wo scp,:1.r;1l(' oq:::nJ;,.;it:ions .::!dd \n ic.lc1,:·ify ,!n.', 1,.,11:t: ,' ,,1·.,,· ,,, ,, .. r,uch·dl' ·,,ct~: . 1'11·· fir 01t prc-:;1n1L·,I defr·,·t: ·ii· J·,,1. cf' c, :'. 1· •11

rncn t antl tnrif [ pol j_c ics . Oq•,;111 ·i o:ati.on::il l y, 11roc v,!t1r,. : 1 o , 1 1 · '" , ,,, , , <, 11

cxi.f_;t. ~:uci1 af; (i) Ll1 c mecha11ii:,.i u[ rv,· ~ p, u,·,1 l ID:,• ii , .. • . : .·, :1 i ,, , , , •

Dj rec l·ori; ;ind ( i.j) l'l ;'.t1lar and r,11 ·p1·co1, •,1siv, T'(i:,:·d 1;:•.·, t: .,,. : . J':·, i · ..

there ;1ppcan, t.o c):ir;t uninhJ \J'ited co11. ,1:unic~1t ic,n ;unu111. 1 lit! ~. -1d 1. , ! :,; J ,, :

h,oth vr,.A ;lll(\ ECG \.'ilid1 i,; f .:1cllit:tt0d by b o tl. orr,nn.ii'dtiL>:i:. 11, ·,,, ·.i·: i 11·.·.'

buildin[;. Coo1cljnat ion> _ther0fore , i :; more a funct .io;1 of .J. c1et('l"!!'j11L(! 11· ;, , "i,,J effort raL110r thn11 basic org:.rn:izntiono.l st·n1cturc. In nny c;.ir;c,> tl:l',(' ;1 1,·, ev.ld cnce of past cuses where l;1ck of coordi1rntion 11,,J a detrjrnc·11t:•l cffr·c-1 ,,,, the dcvcloprn(·nt of th 12 sector. The other major presurned dc[ccl oi t. 1

•. 0 :.,, l. i

organi zations is the duplicatJon of st.1ff nt. hjgh r ;md lower h,vcl,,. ~), _ f eel th at \vi thout studying th e responsibilities of staff in boll1 ori,...1n i ?..nt i c'.1,; in· detail, no conclusive an swer is pos sible . llowcver, given the Govcrnr:ic.11 1 ~ employment policies , it would seem highly unlikely that any r edundant sturf could actually be laid oi:f . There may be .1· few staff snvin gs. ~t ::l~E very senior l eve l s such as Chief Accoun tant, Execu tive SecretRry, bu t whether any dism,issals would be economical, considering compensatory payment s and hi gher salaries to cover the large r re s ponsibilities of the remaining staff is another ques tion. A more appropriate fir s t step would be· to su rvey the m:mpower

. requirements of ECG and VRA and implement any required staff,.reduction pl o.n ~ for each organization separately. » . :..-;· -

£

21. In conclusion, the major benefit of a merger may be staff economies at lower levels wl1ich would, ln any case, have to be weighed against the cost of a major reorganjzation. Such cost may be found in (i) temptation for Government to interfere in the day-to-day management of a large organ\zation may be greater than when two sma ller organizations existed ; (ii) the effort of drafting a nev.1 constitution which wouJ cl have to take account of VRA' s :inter­national obl:i.1;ations under the 1962 Master Agreement and VR.A's Non-Pow~r ac­tivities; · (iii) the partial or possibly complete rewriting of accounti?ng and administrative procedures for a new entity; (iv) the . retraining of staff wl10 would be responsible for both organizations; (v) th e time of senior executive staff to implement and supervise a reorganization, possibly with expa triate assistance; .and (vi) at least an initial pc~iod of uncertainty and confusion among the staff with likely effects on the level of service and the current exp~nsion programs of both organizations. We pronosc, therefore, to refrain ~.,-t te-t=-{~-.GS.S...OlU_fl.£ merger question as a c.onaition or Eh J)Ta<-

posed loan. · ~

RMThiam/~Alber-Glanstaetten/RBnt:es:lam

cc: Messrs.

Mrs.

Chaufournier (Vic e Pres., WANVP), de Azcarate (Chief Econ., WANVP) Dennin g (Prog: Coorc.l., \vANVP) , Wright (Director, h'AN), Botte] icr (Sen ., Econ., WAlDR), Dutt (Chief, WAlDB), Tha]wit z (Dfr., . .WAP), Pouliquc n (A ss t: . Dir., WAP), Rowe (Ass t'. Dir., WAP), Kfor, (Asst . to th e Dir., h1,i\P); P~1lei11 (\U~FCM), McGibhon (HAFGA ), Reitter (h'AFNG ), el M::inrou[:1 (h'/\I'llV), t c Ji ( R~'.\J,\), vn11 dL'r T,1k (PAS)--5, P.ov :1 1ii (Dir., 1'!\!1)--5 , Culli;1t i (ECD), 'L1k h L' Ucld (]T D)' /\ ;,:.CJ" (Lq;a l ) --2 ) Bowl'llll .(1',·.r~. llnrrjs (Con trn]l c 1· ' s )

1,

I Of;/· .. f\lfJ. '>"/

( I 1 /',) WOF:I. Ll ~/\~,K / I~

C llJ f"'.!(), IP I yc·,~r r,l r·, i.1

CT! fGh/\~~1cr ,·;_,.ilf ,I " -

I

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Ll I,,'[)

~---..... - ·--- -------- -- ---- - ·-

' ·10: A\NHI 1: UL()

I· IffrJ_' l

/\CCJ'..i\

D/\ IE: June ·1 (,, ] r·7r)

OR!Glf~ATOl, S U~T.· S71;2

co u r~ rn y: Cl:./,NP,

CABLE NO. & Tf""XT:

CLASS Of-SERVICf-: L1

REF OV;,RDUE SER\1ICE I'AYHEJ\TTS STJ.LL NOT RECI:IVLD ALrII.A. SECOND lIICHFAY

PROJECT LOAN 1182-GH TOTAL or US$1+27 . 50 DUE JUNE 8 .AND US$42, 322. 50 DUE

cTIJNE 15 BLTA ASH.AliTI COCOA PROJECT LOAN lJ.81-GH TOTAL US$33, 250 DUE JUNE l.:>

CPJ\il-1.A TELECOHHUlUCATION'S PROJI:CT LOAN 1122-GH TOTAL OF US$146, 262 DUE

Ju,.•m 15 AHD GUlLDEP.S 11, OLi-Li DELTA rOWER PROJECT LOAN 618-GH DUE JUNE 15

TOTAL OF US$18,506 COMMA CANADIAN' DOLLARS 13,422 COllHA GUILDERS 5Li,230

COMMA POlJND STErJ:.,ING 921. 06 CONMA ITALIAN LI.rJ~ 4,944,391 COMMA

YEN 22,632,427 cmrr,JA DH 56 ,151 COHMA SWISS FRANC 92 ,728 COMMA IRISH

POUND 683.83 COMJ'1A Kffi.JAIT DINAR 61

.5571 880 STOr IMPERATIVE THESE AHOUNTS

FORWARDED -I~MEDIATELY AS EXECUTIVE DIRECTORS HUST BE INFORMED OF

PROTRACTED DELINQUENCIES STOP PLEASE CABLE STATUS URGENTLY

f . t; I'

BLINY-1-iORN INTBAFRAD

---- ·-----·-----NOT TO U2 TRANSMIT! ED ·---------·--··------

HEFEl1ENCE:

Late PnyI'1cnts ----Dr1/\FT[D GY:

JL r,1son:af CLl:/\llAl~Cl:S AIJD COPY u1:;rnmu I ION:

AUTHOntZU) BY (Name):

Thomas A. Blink.horn, Sr. Loan Off:i.ccr DFP/\Hl MnH:

WAJ>lB ---·----- ·w_,-N~\ :-rU[{ C (Of ,nd/vidu,1/ .. i;1,r.'1arized J;-:;;;;;,:<1v·?) -:,,"

. I , • ,,,,.,,/ I ·' f ' • .. ~~ ' / ( ,I/~- • :-'r I • '- t. f--..._

I · ,:r cm,rJ" rn" , a,, usE orCuu sec; ,w, I

-ClllCi:r~ r-u.lll)I.-PAIC!!:- l~ - - -- - --------1

(i 1

0

·10. I~.~-! ,~.r. Ti 'J ' ,'f 1

J' ( ( \

COUNT,,Y: t ~ • ,A

ORIG1Ni'.T()R'S :::x 1 • '.J"/' 2

CLAS~·Clf sr:nvtcL. l.T

,,. /

- . ..-"

F(ij.}.()W}!~(' cn:1,E Sf:t:T 'J'O i\H/.Irn-:1n~FO TODfS QUOTL REF OVEllJ') Ji ~El' lCE

PAY~·,L1,I'S S'.1. .! J 1_, t•O'f RECD\'ED I\.LI'UA SECOND IIIGI.UAY PROJECT LO,\H 1182-{;JJ

'JOTAL OF US$l1 ?7. 50 DUE Jli E 8 AND US$42, 322 . 50 DUE ,JUNE l.'.i hLTA ASF/Jl'i'I

COCOA PR.OJF CT LOlN 1131-GH TOTAL OF US$33 ~ 250 mm Jln-m 15 G/,J':!_.:~.

/

TEJ EC01-1NUlGCATlONS PROJECT LOJ\J.~ 1122-GII TOTAL OF US$1Lf6,262 lJUE :1lir,E J. 1)

AND GUILDERS 11 > OLi.4 DELTA P01·:ER PlWJECT LOAN 618-CH DUE JUNE 15 TOTAL OF

US$18,506 COliH\. C/u'\JADIN~ DOLLARS 13,422 COMMA GUILDERS Sli,230 COMMA

POUND STI:RLING 9?1.06 cmRrA ITALIAN LIRE'~9~4,391 cmt.11\ YEN 22,632,427

G0l'J1A Dll 56/151 COl'WA SWISS Fr-ANC 92,728 COMMA I1US1I POUND 683.83 COi:-.ll·lA

Ktfh'AIT DII/.B G, 557., 880 STOP INPERATlVE THESE Af-10UNTS FORWl\ROED

H;NEDIATELY AS EXECUTIVE DIRECTORS 1'1UST BE INFORMED OF PROTRACTED

DELINQUENCI.t:S ··STOP PLEASE GABLE STATllS URGENTLY UNQUOTE

1:~ BLINKHORN ,r

I NTBAFRAD

---- - --- ---·-Nm TO BE Tn;: .. ,J:'MITTED -----------

t J f.. \

[ , Ii

·EH ENC[: 1\Ul r!OHIZl::D UY (N,crr,e/ : ---- ·-------------Late Payments Thomas A. Dl:i.nkhorn, Sr. Loan Offic0r

.FT!::I.J !{\'~----- . ULr'/,ll'I ;1.rNT:

1•,r:1 f:on : .:1f /'.RAN(;r !.., A·r\Jo cof·Y tl1S~rn1sur-10N: - -·- -- ----

HAP] t

f

cc: ?-~eo r~. nav .. e 11 ~ I,ocn m:; '.!f

3:~-..1 oni .-.u 10 GI and 61 G'."l

(), ,''

------.,.1 16, 1976

oltn Ri·,,~-: u • c, .. ., P. C ~ Ho:-: ! .7 Ac .. a,

Re:

Loa.n(s) No. ~10 ,1 m1 "'18 cm Gentlemen:

I:: .t,. r to our ab1 :. tc-.(· J.n ):cspo u,~vtQ....H, :recn.1,es~ ;.,i;-01,1 u~. ¥.?~~~n-.lli-E:.~. FJJ-'!_"':r. we are furnishing

You t he 'f ollo,; rii"g'" iiifo1:ma:cI0n ~ai ·at

Q

D D

D

D

D

D D D

1·at"cl'. · · ~ 1976 .

Copy of our maturity record attached showing disbursements, repayments, amounts outstanding and port i on held by IBRD and third parties.

Interest rate % p.a. 0 Commitment charge rat e % p.a.

Accrued charges to above date not available as our records are designed to show charges accrued to the next payment date.

Chare;es have been paid through

Charges have b een debited to Loan Account under Category

U.S. dollar rq_uivalent of balance disbursed and outstanding

Loan(s) guaranteed by

Signed copy of your confirn.iation att ached.

Other

Sincerely yours ,

~ . n. 1. ,. Chief, Accounting Division

Attachment ( s) cc:

.,,puty Controller' s Department

Form No. 575 (2 -72 )

VOLL'lAU

ACCRA

/

~G-~~ )ca- r; {:J

I< Ch.-~ J0e-- 3 JC>

APRIL 16, 1976

LT (272:5)

REURCJJJ APRIL 13, 1976 LOAR NOS 310GB Am> 6l8GH STOP .AMOONTS RBQUEST.lm -

Alm AS FOU'.mS: 310GB DISBURSED 47,000,000, OUTSTAlID!NG 32,598,,000,

REPAID 14.402,000 618GR DI.Sl3URSED 6,000,000, O~"DING 6,,000,000

STOP FIGURES EXPRESSED IN USDOLLAB EQUIVALENTS, AS CF l1ARCB 31,. 1976

STOP W ABE AIRMAILING TODAY COPIES OP Otta MATUlUff RZCORD SHOWING TIIE

ce: Messrs. Davi.as/Gray

..

David w. Cray

Controller• a Pile .. Loan Docuoont Filea • :no Gll & 618 JNel80a/hgw

i l

'

0

G'1145 WORLDBANK

WUI NYK

WUI008 ACCBA 59 13 1020

April 13 1976

D ISTRIBlITIO;J:

Mr. Perch-Cont.

LT INTBAFRAD DISBURSEMENTS DIVISION WASHDC

GRATEFUL IF FOLLOWING INFORMATION SUPPLIED BY CA BLE STOP

PLEASE SUPPLY US WITH THE FOLLO~ING IMMEDIATELY Cl)

1976 APR I 3 PH 2: li 2

COM~iU>i IC;\ T IO NS SECTION

AMOU~T of · ALL CURRENCIES DISBURSED UNDER LOAN NUMBER 310GH _ .. ____ ,.._ ,_ ... -..... ~ ... , ... .. ....... .., ... ... ..... - -· . .. ... , __ . .. -· ., . ···--- ... ·-- - ' .---- -

AND 'G12GH (2) THE AViOUNTS IN THESE CLIRF.ENCIES P/-\ID . . . . -·'"'

TO DATE (3) BA LA NCESS OUTSTANDING TO BE PAID STOP

ABOVE INFORMATION

COL LT ( 618GI~ (2) (3)

URGENTLY NEEDED FOR RATE NEGOTIATIONS IN PROGRESS

VOLLTAA ACCRA

'

: ;, ..:.

- ·1

,,

.·~

I

- .. ... --

• 1 ·.

' -~ .. ' .. :

. r: ... r. .. ::

'":·

t -

H I

r ·1

j j J ' •

r

The World Bank / 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. • Telephone: (202) 393-6360 • Cables : INTBAFRAD

All IL

Volt i v r thor ity P. o. Box M77

ccra , Gh

rch 10, 1976

Re: Loan No. 618 GH Loan Service Payments Due in Various Currencies

Gentlemen:

In accordance with Section 4.05 of the General Conditions Applicable to Loan and Guarantee Agreements which applies to the above-mentioned Loan the International Bank for Reconstruction and Development will, until further notice, accept US dollars, French francs or pounds sterling and attempt, as your agent, to acquire any of the currencies which are payable ·to the Bank under this Loan and which you specify under the terms of this letter.

In the event that you accept this offer for the above-mentioned Loan, our Sunnnary Statement of Amounts Due will in future list the amount due in each currency and the estimated US dollar, French franc or pound sterling equivalent of the currencies you have selected. Upon receipt of the dollars, francs or pounds the Bank will purchase on your behalf the currencies selected at the current market rates of exchange. However, since market rates are subject to fluctuation, it will not be possible to determine in advance the exact amount of US dollars, French francs or pounds sterling required to purchase the selected currencies. Any difference between the amount requested and the cost of the selected currencies so purchased by the Bank on your behalf will be subject to adjustment, In the event that the difference is significant, any overpayment will be refunded to you by the Bank. If the amount received by the Bank is insufficient to cover the total cost an additional amount will be requested. All minor differences will be carried forward on your loan account to the next payment date.

Since payment obligations of the Borrower under the Loan Agreement will be fulfilled only when the Bank has acquired the selected currencies due to the Bank, if you wish to accept this offer yod must transmit the dollars, francs or pounds to the Bank at least five working days in advance of the regular payment date of the Loan.

Form No. 495 (1-76)

. •. /2

Re: Loan No. 61

- 2 -10, 197

If you wish the Bank to act as your agent in acquiring all or selected currencies, please list the currencies you wish purchased indicating whether you will remit US dollars, French francs or pounds sterling for that purpose, and return the enclosed copy of this letter signed by your duly authorized representative.

Enclosure:

International Bank for Reconstruction and Development

1818 H Street N.W. Washington, D.C. 20433 U.S.A.

Attention: Controller

Gentlemen:

Sincerely yours,

Victor C. Chang Deputy Controller

We wish to accept the above-mentioned arrangement and will in future furnish * to the International Bank for Reconstruction --------------------and Development so that it may as our agent, seek to acquire the currencies

listed below. (Please check one of the following):

() We wish to have the Bank acquire on our behalf the following currencies only:

*Specify US dollars, French francs or pounds sterling.

Fonn No. 496 (1-76)

• •• /3

Re: Loan No. 618 I'll

- 3 - Nb 10• 1976

() We wish to have the Bank acquire on our behalf all of the currencies due under this Loan.

It is understood that we may add to, or delete from, the above list, any currency due, provided we give the Bank notice of our intention three months before the next payment date.

Date=------------- By: _____________ _ (Authorized Representative)

Form No . 27 (3-70)

INTERNATIONAL DEVELOPMENT

ASSOCIATION

TO: MCGIBBON INTBAFRAD ACCRA

COUNTRY: GHANA

TEXT: Cable No.:

31~

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

OUTGOING WIRE

DATE:

CLASS OF

SERVICE:

}~ bl~

INTERNATIONAL FINANCE

CORPORATION

DECEMBER 19, 1975

FOLL~ E SENT TODAY TO FINANCE QUOTE REF. POWER LOAN 618-GH STOP

ALL SERVICES PAYMENTS EXCEPT ITALIAN LIRE TOTALING 4,944,391 HAVE BEEN

RECEIVED STOP GRATEFUL IF YOU COULD KINDLY REMIT ITALIAN LIRE SUM DUE

SINCE DECEMBER 15 UNQUOTE REGARDS

BLINKHORN INTBAFRAD

NOT TO BE TRANSMITIED

AUTHORIZED BY: CLEARANCES AND COPY DISTRIBUTION:

NAME Thomas A. Blink.horn, Sr. Loan Officer

TABlinkhorn:cb J REFERENCE:

ORIGINAL (File Copy) (IMPORTANT: See Secretaries Guide for preparing form) Checked for Dispatch: --------------

Form No. 27 (3-70)

INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION

TO:

COUNTRY:

TEXT: Cable No.:

AUTHORIZED BY:

NAME

DEPT.

APPIAH MINFIN ACCRA

GHANA

OUTGOING WIRE

DATE:

CLASS OF

SERVICE:

DECEMBER 19, 1975

LT (5742) ~

tJ

REF. POWER LOAN 618-GH STOP ALL SERVICES PAYMENTS EXCEPT ITALIAN LIRE

TOTALING 4,944,391 HAVE BEEN RECEIVED STOP GRATEFUL IF YOU COULD

KINDLY REMIT ITALIAN LIRE SUM DUE SINCE DECEMBER 15 STOP REGARDS

BLINKHORN INTBAFRAD

NOT TO BE TRANSMITIED

CLEARANCES AND COPY DISTRIBUTION:

Thomas A. Blinkhorn, Sr. Loan Officer cc: Mr. Bararia (Treasurers)

TABlinkhorn: cb WAPI~ ~ ,YJ_ 44~,,,,~

SIGNATURE--.::-:-::-----~----p'-------------1 <SIGNATURE OF INDIVIDUAL AUTHORIZED TO APPROVE>

REFERENCE:

ORIGINAL (File Copy) (IMPORTANT: See Secretaries Guide for preparing form)

L

'l'h Chi f E cuti,r Vi 1 t.a Rt r Authority p. o. M17 Acttra, Qi

Dear Sir:

If you have tm.y at • 1 t

. Y . . e i • b utl Dl-r ctor

Mr Cargill Mr Dutt Messrs. Davies'Gray

TCrausway'apd

thf.e opo 1. pl

s ~~ /,; .. /

~ :,

Vietol' C. Deputy Co troller

-[iiJ To: Mr. R. W. Bates

with the compliments o W. Hamil ton

Scheer, G. B . "Prediction of long range power generation require­ments in foreign countries"

Conference paper, CP 187-PWR IEEE 1971

ACRE.S 11\iTER'IIATIOl\iAL Lll\tllTFD ) L It F f (r

1 >' Der t r<-t£ r > 1, c N1dq II Cr"" rio

International Bank for Reconstruction and

Development 1818 H Street Washington, D. C. 20433

Attention: Mr . R . W. Bates

November 4, 1975 P3796

Gentlemen: V Ghana Power Study

We have pleasure in enclosing as requested a photo copy of G. B. Scheer's paper "Prediction of long range power genera­tion requirements in foreign countries" . The copy we have is a December 1970 preprint. We do not have the final version which may be available in the conference proceed­ings from IEEE .

WH:dj Encl .

A 'AlS t\lTl ·"'AT ( A I fl/" ~ ~

'259 Ovc "estP· Road. PO Box 1001 N1dgdrd F-alls, Oritari'l L2E 6W1

Yours very truly,

W. Hamilton Executive Engineer

NOV 1 U 197 Date B.eo'd. -------- - _ ...... ~J ?~) Dete Ack'd. ~~lQ __ ~' ~ lssigned to ~/J?t!'e} ~

------------- ,_./' ~If. v ~,.~--~w

TE leph,,ne 41 6-354-3831 TWX 610-376-0680 T elP.X OZ' r,1 C, r

RECEIVED !9l5 NOV -6 AM II: 17

1.NCOMING MAIL UNIT

A paper recarmended by the IEEE Pc:Mer Generation Cc:mnittee of the IEEE PCMer Engineering Society for presentation at the IEEE Winter Pc:Mer Meeting, New York, N.Y., January 31-Fet-~uary 51 1971. Manuscript sub­mitted October 13, 1970; made available for printing December l, 1970 "

PREDICTION Of LONG-RANGE POOER GENERATION REQUIREMENTS IN FOREIGN COUNTRIES. PART II.

George B. Scheer Consulting Engineer Oakland, California

Paper #CP62-164, with the same title as above, was presented by the author at the 1962 winter general meeting. The paper developed a statistical method of load forecasting using a mathematical formula. A table was shown which started in 1953 and developed the load through 1986 for the United States. (Al­though the paper was for foreign countries, the formu­la must also be useful for the United States). At that time the usage in the United States was known only to 1960.

Although many predictions for load growths have been made they are often changed as time progresses. The object of this paper is (1) to check the actual results for the 1956 to 1968 period with those that were predicted or, using data available in the fif­ties, that could have been predicted and (2) to ana­lyze the various reasons in those cases where there has been a deviation from the estimated usage. The formula used is limited to usage per per/on and race of population growth. As pointed out in the original paper other factors would include the prosperity of a country, availability of power, and cost of power. None of these factors have been included in the calcu­lations although they undoubtedly have been instrumen­tal in causing some of the deviations from the for­mula.

A subsequent article was published in Energy International in February 1966. The table was re­worked in that it was extended to 1990, and the start­ing date was changed to 1956, using the RMS value of the five years - 1954 to 1958. There was also an updating in the population growth rate.

The prediction for 1986 for the United States was l01oTered from 3,885,144 GWH to 3,851,223, an 0.9% change. This change was made as the data for the for­eign countries was more consistent using the 1956 RMS value and it was felt necessary that au identical method be used throughout.

Table I shows the original prediction made in 1962, the modified prediction of February 19 66 and the actual usage as derived from the 1969 Statistical Yearbook of the United Nations.

Two important items had been added in the Febru­ary 1966 article. First, a formula for determining demand from KWH was developed. Th is was based on the theory that the load factor would approach 65%, reduc­ing any difference in half every 16 years. Although the demand is often the main objective of a load growth study, this present particular paper will con­fine itself to a KWH comparison, the above method per­mitting a read y conversion to demand. As the load factor approaches 65% over a period of time and as this formula is for long range prediction, the power usage, which is expressed as GWJ!, can be converted to MW demand by multiplying by 17 \% .

Th e second addi tion in the 1966 article was a table which was a prediction for four countries of divergent characteristics: Canada, India, Iraq, and Great Britain. At that time actual usage was only known to l962 or 1963. This table has now been up­dated. It should also be noted tl~t whereas the

11 CP 1

predictions for 1970 and 1975 dictions for 1966, 1967, 1968 ted. These are now inserted table was prepared in 1966.

had been shown, the pre­and 1969 bad been omit•

as developed when this

Tables and data in this present paper are divided into three parts as follows:

1. Table I which shows for the United States both the estimated generation of the 1962 paper, the 1966 article and the actual figures of the 1969 Sta­tistical Yearbook.

2. Table II which shows for the four countries used in the 1966 article, the estimated generation and the actual figures of the 1969 Statistical Yearbook.

3. The original paper pointed out that the Sta­tistical Yearbeok had data on 109 countries and that all of these were included in the development of the formula. It would be desirable to develop a table showing a comparison of each of these countries be­tween the actual and estimated usage. In all cases the year 1956 is used as a starting point. To obtain th RMS value of the five contiguous years, it is nec­essary to know the power usage of 1954 to 1958. It is also necessary to have reasonably accurate population figures and the population growth rate from this peri­od of time. Where the data does not appear to be suf• ficiently complete the calculations could not be made. It should be noted that no information on power usage since 1958 enters into these calculations. It is as­swned that the population figures of 1956 and the rate of population growth should have been obtainable with reasonable accuracy.

In the United Nations Yearbook, figures are shown for P or I+P or both; I representing industrial load and P representing utility load. As it is necessary that both the entire population and entire load (I+P) be used in the data, only those countries that either show usage in terms of (I+P), or contain information relating P to (I+P) have been tabulated. Countries with controlled economies or with a usage of less than 100 GWH in 1956 have been omitted. Table Ill is consequently limited to 65 countries.

In developing Table Ill the following procedure was adhered to for all countries:

1. Where possible the 1953 population figures as printed in the 1960 Yearbook were used as a base. In some cases this information was not available ao some other year was used.

,,. 2. As it is assumed that an accurate forecast of

population growth was obtainable, the es timate of pop­ula t ion for 1967 as shown in the 1968 Y~LrboQ)c was used in developing the population grow th. From these two years the population for 1956 an population growth were calculated.

3. Xn the formula used, i . e.

log G = C - 0.15 log U

we wi~h to reiterate the following:

,......._...

(a) Both logs are to the base 10

(b) "G" is the annual growth rate in per­centage point n

(r. ) ··u" is the usage per person. tually represents the generation requirement son that is , before any line loss.

This ac­per per-

(d) """e original article used C as equal to 1.28 plus . 05 times the population growth rate, that is with a population growth rate of 1.8%, C woul d be 1.37. In a discussion at the World Power Confer­ence (1966) I pointed out that for countries with a very rapidly growing population the estimate would be too great unless the population growth was due to im­migration. I stated then that without immigration, a limitation of 1.37 should be used. This however re­quires a judgment as to whether the population grew by immigration or birth rate. As it is desirable to keep this formula striGtly mathematical and apply judgment only after the calculations have been made, "C" as now used is 0.02 times the population growth rate plus 1.330, this applying regardless of how the population increased.

(e) In the article in Energy International it was emphasized that, with the annual variation of load growth, figures could readily be adjusted depend­ing on the starting year used. It was pointed out that it would be desirable to use the RMS value of five consecutive years as the starting value of the middle of these years. In all cases the year 1956 has been used as the starting date as, for almost all of the countries involved, the growth rate was quite uni­form for the five year period of time 1954 to 1958.

Results are shown in Table III which lists the countries in descending order of deviation of actual usage as compared to predicted usage. Seventeen coun­tries, with 80% of the 1956 load, show a deviation of actual load from estimated load of 7% or less, after a twelve year period of time. This also applies to the World as a whole.

Heading the list are countries that have benefit­ed from installation of large chemical and/or aluminum plants. This load growth should, as explained in the original paper, be based on normal growth plus the load of the new plants. This is not shown in the table in this fashion as it is, as stated above, de­sirable to tabulate on a strictly mathematical basis,

A few countries that have either made a concerted effort to increase their power capability or general economy are very high on the list. Also high on the list are countries that have had a sudden load in­crease. A chart of total load should be looked at sideways. It is usually sufficient to know whether a given country will have a 10,000 GWH (for example) load in 1973, 1974 or 1975 instead of having the esti­mated load in each of these years. An external assis­tance program and/or hydro development will expedite the growth considerably and create what may be termed a horizontal "bump" in the curve.

With a few exceptions, countries with a large power usage have a small deviation. These countries can be expected to have their load growth continue according to formula.

Whether the deviation is large and/or the coun­try is a small user of power the basic question is in

2

regard to its future load growth . Figure 1. shows the condition where the deviation is larger than should be acceptable for expecting the growth to continue in ac­cordance with the formula. Point A represents the GWH in 1956, point B the actual usage in 1968 imd po i nt D the 1968 calculated usage. The curve from AD is a smooth line whe rea~ from A to B it will be jagged . Will it continue to C, or to C', or to C"?

If the growth to B has been the result of inter­nal forces uninfluenced by political consideration, either in the past or anticipated for the future, the curve should follow from B to C. Many countries will be in this category, viz. liong Kong, Puerto Rico, Japan.

If the growth to B has been the result of a hydro project and a large industrial plant the curve will follow from B to C' or C". Which, will be determined to a large extent by the growth rate before the sudden addition and by the effect of this sudden addition on the general economy. Examples of this category are Ghana and Cameroon.

A third condition exists when a large hydro plant and/or an assistance program is introduced. The curve is more likely to follow along to C" than C', partic­ularly if the newly introduced conditions are limited in scope.

It should be noted that when the curve continues to C", there exists the horizontal "bump" referred to above, the amount of "bump" represented by BB".

The distinction between C' and C" requires con­siderable field information and careful analysis .

Figure 2. shows the reverse condition. If there appears to be no change in economic conditions, assis­tance, or hydro projects, the load csn be expected to follow in a straight line, that is B to C. An im­provement in economic conditions will cause the load to grow from B toward C'. Point B, in this case, is essentially substituted for point A and growth from that time on can be considered to follow the mathemat­ical formula, using 1968 as the starting date.

REFERENCES

(1) G. B. Scheer, "Prediction of long-range power generation requirements in foreign countries," AIEF. CP 62-164 and Electrical Engineering, June 1962.

(2) G. B. Scheer, "Future Power Prediction," Energy International, February 1966.

(3) Statistical Yearbook of the United Nations, 1960, 1968, 1969.

(4) World Power Conference - Journal, vol. 6. Crnmnents by G. B. Scheer, 3019 .

October 1966, pp. 2980 and

TABLE I

Comparisons of Estimates and Actual Power Generated in the United States

Year

1953 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90

Estimate Paper CP 62/164

Jan. 1962

514,169 550,058 588,177 628,644 671,580 717,113 765,375 816,508 870,718 928,098 988,888

1,053,166 1,121,200 1,193,181 1,269,306 1,349,653 1,434,546 1,524,205 1,619,010 1,719,065 1,824,616 1,935,918 2,053,235 2,177,045 2,307,450 2,444,974 2,589,716 2,742,250 2,902,672 3,071,371 3,288,962 3,478, 077 3,676,675 J,885,144

(, w H

3

Estimate Article E. I.

Feb. 1966

663,276 707,318 753,930 803,237 855,447 910,709 969,085

1,030,719 1,095,964 1,164,791 1,237,474 1,314,197 1,395,020 1,480,256 1,570,107 1,664,784 1,764,671 1,869,845 1,980 ,34<f 2,097,194 2,219,880 2,348,855 2,484,619 2,627,484 2,777,776 2,935,554 3,101,119 3,275,092 3,457,846 3 ,649,756 3,851,223 4,062,655 4,284,475 4,517,122 4,761,047

Actual Generation

514,169 544,645 629,010 684,804 716,356 724,752 795,251 841,616 878,712 946,526

1,011,418 1,083,741 1,157,583 1,249,444 1,316,914 1,435,512

Year

1954 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75

TABLE II

Comparison of Power Generated in Canada, India, Iraq and United Kingdom Published in 1966 article and actual usage now updated

Canada India Irag Ef.l timated Actual Estiw.ited Actual Estimated Actual

GWR _QfilL GWH _QfilL GWH _QfilL

73,976 9,669 390 82,816 10,877 489

87,103 88,392 12,505 11,972 504 506 92 ,939 91,050 14,347 13,752 562 481 99, 129 97,468 16,426 15,415 626 626

105, 691 104,628 18,678 17,794 696 736 112,635 114,378 21,293 20,123 773 852 119,990 113,713 24,234 22,957 857 939 127,777 117,469 27,530 26,227 949 995 136,018 122,325 31,211 30,305 1,049 1,063 144,737 134,987 35,325 33,133 1,159 1,166 153,957 144,274 39,910 36,825 1,278 1,207 163,702 158,135 45,007 40,411 1,409 1,377 174,015 165,625 50,673 45,357 1,551 1,431 184,908 175,426 56,951 49,520 1,706 196,409 63,910 1,874 208,548 71,618 2,057 221,353 80,133 2,255 234,811 89,533 2,469 248,994 99,892 2,701 263,933 111,300 2,951 279,663 123,844 3,221

Notes: Estimated GWR for 1966 to 1969 and 1971 to 1974 were not shown in Feb. 1966 but had been calculated.

Estimated GWH for 1956 is RMS value of Actual GWH for 1954, 55, 56, 57 and 58.

On account of the limitation of constant "C" at 1.38 for a non-inmigrant population increase, the estimated GWH for India is re-estimated in Table III.

Population Growth rate used 2.0944% 2.2765% 1. 3754% Population used - as of 1960 17,845,000 429,597,000 6,551,000 Constant "C" used 1. 385 1.394 1. 349 Deviation from 1956 -5.51 -13.00 -7.74 Years involved 12 12 11

4

United Kingdom Estimated Actual

GWH ~

86,348 94,076

100,492 101,168 107,194 105,592 114,280 113,315 121,765 121,176 129,680 136,971 138,031 145,958 146,857 160,452 156,161 173,647 165,980 182,792 176,337 195,993 187,252 202,564 198,749 209,368 210,872 223,302 223,630 237,048 251,152 265,970 281,529 297,858 314,985

o. 7622% 51,057,000

1. 318 +5.89 12

, . .,

TABLE III

Comparison of actual powe~ usage with that estimated. Estimate for 1975

1956 Deviation Countr~ Po2ulation Statistics Energ~ - GWH Actual 1968

As Used As Used Est. for Est. for Energy Actual/ Rank Name x 1000 Growth Rate 1956 1968 1975 ....ill! Estimate

1 Ghana 5,963 2. 8387. 263 1,113 2,350 2,589 + 132.6% 2 Cameroon 3,488 4.176 101 515 1,190 1,016 97.3 3 Hong Kong 2,522 3.876 662 2,196 4,186 3,948 79.8 4 Puerto Rico 2,308 1.423 1,330 3,461 5,768 6,182 79.6 5 Greece 8,050 1.007 1,635 4,747 8,433 7,340 54 . 6 6 Thailand 21,830 3.735 380 2,063 4,896 3,138 52.l 7 Japan 19,376 1. 019 78,200 180,052 289,581 270,611 50 . 3 8 Israel 1,831 3.490 1,341 3,733 6,532 5,506 47 . 5 ~-9 So. Rhodesia 2,732 4.705 1,236 3,938 7,421 5,516 41. 6

10 Pakistan @ 85,218 2.112 795 3,705 9,731 4,991 34 . 7 11 Denmark 4,465 o. 732 3,728 8,991 14,370 12,097 34.5 r 12 Venezuela 6,110 3.946 2,700 8,283 15,210 10,814 30.6 13 Spain 29,266 1.009 13,542 35,317 58,659 45,900 30.0 14 Taiwan 9,124 3.369 2,433 7,804 14,584 10,036 28.6 15 Norway 3,442 0 . 778 24,400 47,022 67,358 60,123 27.9 16 Cyprus 527 1. 391 138 368* 702 466* 26.7

Trinidad 739 2.888 314 919 1,634 1,119 21. 7 Singapore 1,325 3.597 446 1,373 2,551 1,639 19.4

19 Uganda ® 6,040 2.510 155 613* 1,481 731* 19.3 20 Ireland 2,937 (-) 0.122 1,675 4,023 6,390 4,792 19 . 1 21 Netherlands 10,913 1. 314 12,361 29,420 46,960 33,619 14.3 22 Finland 4,248 1.009 7,000 15,667 24,168 17,831 13.8 23 Australia 9,400 2.160 16,872 39,476 62,681 44,531 12.8 24 UAR 23,666 2.457 1,581 6,042 12,127 6,735 11. 5 25 Jamaica 1,562 1. 678 318 969 1,693 1,068 10.2 26 Ethiopia 21,132 1.032 48 329 836 361 9.9 27 New Zealand~ 2,175 2.067 5,108 11,401 17,582 12,185 6.9 28 Italy 48,526 1.007 40,649 97,733 156,249 104,011 6.4 29 Panama 948 3.123 183 552* 1,154 582* 5.4 f 30 Nicaragua 1,276 3.087 123 463 924 484 4.6 31 West Germany 50,870 1.152 84,012 192,100 300,740 198,913 3.5 32 Portugal 8,791 1.007 2,138 6,020 10,367 6,215 3.2 33 United States 167,898 1.563 663,270 1,394,991 2,092,012 1,435,512 2.9 34 South Korea 24,844 5.006 1,212 5,160* 13,305 5,276* 2 . 2 35 United Kingdom 51,749 0.567 100,530 218,764 332,376 223,302 2.0 36 Sweden 7,315 0.664 27,037 55,452 81,680 56,237 1.4 37 Peru 9,667 2.278 1,640 4,851* 9,904 4,880* 0.6 38 Austria 7,050 0.431 11,739 25,907 39,550 25,714 (-) 0.7

Philippines 23,564 3. 569 1,767 5,647+ 14,614 5,567+ 1.4 Turkey 24,675 2.595 1,861 7,022 14,062 6,886 1. 9

41 Canada 15,898 2.310 87,102 181,362 271,678 175,426 3.3 42 Belgium 8,944 1.006 12,528 28,255 43,771 26,460 6.4 43 France 44,105 1. 122 53,908 126,106 199,267 117,925 6.5 44 Iraq 6,274 2, 737 504 1,541* 3,217 1,431* 7.1 45 Switzerland 5,111 1.577 15,308 33,043 50,335 30,552 7.6 46 South Africa 13,324 3.118 17,745 44,848 74,503 40,948 8.7 47 India 398,734 2.283 12,506 54,385 115,445 49,520 8.9 48 Mexico 31,144 3.542 7,796 25,470 49,213 22,731 10.8 49 Malaysia 6,148 3.077 960 3,304 6,360 2,920 11. 6 50 Columbia 13,366 3.343 2,500 7,643* 16,170 6,700* 12.3 51 Luxemburg 310 1.007 1,146 2,339 3,443 2,043 12.7 52 El Salvador 2,252 3.104 172 667 1,360 582 12.7 53 Costa Rico 1,003 4.301 288 964 1,850 833 13.6 54 Equador 3,859 3.288 270 1,083 2,238 850 21. 5 55 Iceland 160 l. 020 421 934 1,446 729 21. 9 56 Argentina 19,346 1. 687 8,400 23,013 39,381 17,851 22 .4 ' 57 Dominican Rep . 2,627 3.632 230 904 1,862 701 22 .5 58 Guatemala 3,355 3.144 188 693* 1,621 535* 22 .8 59 Brazil 61,143 3.122 15,776 50,153 94,725 38,181 23.9 60 Tunisea 3,811 l. 642 249 908 1,774 678 25.3 61 Ceylon ~ 8,926 2.492 202 917 1,985 650 29. 1 62 _ Ur uguay 2,586 0.669 1,140 2,758* 4,931 1,944* ?. 9.5 63 Syria 3,905 3 .280 276 1,102 2,338 773 29.9 64 Bolivia 3 , 277 1. 358 300 1 ,044 1,963 672 35.6 65 Chile 6,938 2.534 3,950 10,973 18,928 6,918 37.0

5 :,;,

~

L

TABLE III (continued)

Comparison of actual power usage with that estimated. Estimate for 1975

1956 Po2ulation Stat i stics

Rank --f~,.:aa::.:m=e'------- X 1000

World

Notes:

* 1967 figures + 1966 figures

1,691,900

As Used Growth Rate

1. 366

(3) Industrial generation not included

A

Time -..0 Q) 0 lt\ ~ co er ~ S!:

Figure 1.

Energi - GWH As Used Eit. for

1956 1968

1,673,700 4,413,800

-..0 U'\ er

6

Est. for 1975

7 ,1+19 ,800

Time

cO ~ 0-

Figure

Actual Energy ~

4,191,900

2.

/

/ /

/

C) 00 0-

/

/

/ ,

Deviation 1968 Actual/ Estimate

(-)

/

/,

/

c'

5. 0

Mr. Robert G. Tunnell Kaieer Aluminium & Chemical Corporation 300 Lakeside Drive Oakland, California 94643

Dear Mr. Tunnell :

Re : Loan No. 618-Gll

October 14. 197S

.!•lco Fifth Potline Expansion

Thank you for your letter of October 10 with the attached copy of the Escrow Release. I look forward to receiving a co=plete bound voluae of the docUtllents pertaining to Valeo'• fifth potline expansion; I aa not altogether certain that our files are C0111)1ete. I hope to have the opportunity to work with you again in the near future.

With but regards.

bee: Mr. Munthali

Sincerely,

T .M.c. A.seer Attorney

I NTl1 RNAT10 NAL

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COMMENTS PLEASE EXPLAIN THAT RENEGOTIATION OF THE CONTRACT RATE PURSUANT

TO SHAWMONT STUDIES WILL HAVE A MATERIAL BEARING ON THE VRA' S FINANCIAL

POSITION AND ITS CAPACITY TO CONTRIBUTE TO COST OF KPONG STOP IF AT .ALL

POSSIBLE SETTLEMENT OF THIS ISSUE SHOULD PRECEDE A OONTRACT FOR SALE OF

ADDITIONAL POWER TO V.ALCO STOP OUR SINGLE MOST IMPORTANT CONCERN IS BASED

PRIMARILY ON MAKING IT POSSIBLE FOR THE BANK TO PARTICIPATE IN FINANCING KPONG

AND CAN ONLY INDIRECTLY BE GIDUNDED ON OUR INTEREST AS A LENDER IN VRA I S

CONTINUED FINANCIAL VIABILITY S'IDP IN OTHER WORDS, THE BANK IS NOT IN A STIDNG

FOSITION TO REFUSE TO APPROVE POWER CONTRACT .AMENDMENTS ON BASIS OF EXISTING

LOAN AGREEMENTS . WE ARE FURNISHING THESE INITIAL COMMENTS ON THE POWER

OONTRACT IN RESFONSE TO GOVERNMENT'S (CONT ••• ) NOT TO BE TRANSMITIED

AUTHORIZED BY: CLEARANCES AND COPY DISTRIBUTION:

NAME

DEPT.

Devbrat Dutt, Division Chief

Western Africa IB

cleared in substance with: Messrs . Ribi c.- Jennings

clearance and cc: Messrs. Heininger .Al ber-G lanstaet tei

SIGNATURE _---=----'-.---------------I < SrGNATURE oF INDl'Jl.JDtJAL AuTHoR1zEo To APPROVE> DDutt: Silber: crm

REFERENCE: For Use By Communications Section

ORIGINAL (File Copy) (IMPORTANT: See Secretaries Guide for preparing form) Checked for Dispatch: ________ J{:j-'-"..___'¥-4.cc-~,,,__

Form No. 27 (3-70)

INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION

TO:

COUNTRY:

TEXT: Cable No.:

AUTHORIZED BY:

NAME

DEPT.

OUTGOING WIRE

PAGE ®

DATE: JULY 28, 197.5

CLASS OF

SERVICE:

REQUEST FOR COMMENTS ON DRAFT DOCUMENTS STOP JILS) AIRMAILING LETTER

INCLUDING METHO.OOLOGY TO DEFINE OOST OF FOWER FROM KFONG STOP FI N.ALLY,

WHILE THE OOMMENTS BELOW ARE DI RECTED AT EACH ELEMENT I NDEPENDENTLY WE

RECOGNIZE THAT OVERALL THE DRAFT AGREEMENTS NECESSARILY REPRESENT A COMPROMISE

RESULTI NG FIDM A PIDTRACTED NEGOTIATI ON PIDCESS INVOLVING FOWER AND NON- POWER

RELATED ISSUES STOP QUOTE FOWER CONTRACT PREAMBLE : IN FIFTH SUB- PARAGRAPH ADD

REFERENCE 'IO MEMORANDUM DATED MAY 8, 1975 . ARTI CLE 2 (A] (i) RE VRA'S OBLI GATI ON

TO I NCREASE THE R)WER CEILING FIDM J70MW to 400 MW AND SUBSEQUENTLY TO 415MW AT

SPECI FIED CONTRACT RATES ( SEE COMMENTS ON ARTI CLE 3) . THE BASI C QUESTION ARISES

WHETHER VRA SHOULD PLEDGE FIRM FOWER BEYOND 370MW BEFORE HAVING CONCLUDED

ARRANGEMENTS FOR KFONG . VRA CERTAINLY HAS SPARE CAPACITY AT AKOOOMBO UNTIL

ABOUT 1978/1979 BUT I N ORDER TO SAFEGUARD ITS FINANCIAL INTERESTS AND FOWER

SUPPLY TO OTHER CUS'IOMERS VRA MAY CONSIDER DEFERRING FI RM COMMI'IMENT OF ADDI TION.AL

RJWER BEYOND 1978/79 UNTI L ARRANGEMENTS FOR KFDNG HAVE BEEN MADE . THE SUBSEQUENT

COMMENTS APPIITCABLE I F VRA HAS TO AMEND OONTRACT FOR FDWER OVER AND ABOVE 370MW

NOW I N ADVANCE OF SETTLI NG DETAILS OF KFDNG . (ii ) WE WOULD LIKE TO KNOW WHAT KIND NOT TO BE TRANSMITIED

CLEARANCES AND COPY DISTRIBUTION:

SIGNATURE-~---~-,---------------1 <SIGNA"l'.URE OF INDIVIDUAL AUTHORIZED TO APPROVE)

REFERENCE: For Use By Communications Section

ORIGINAL (File Copy)

(IMPORTANT: See Secretaries Guide for preparing form) Checked for Dispatch:---- - - - - - ---

Form No. 27 (3-70)

INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION

TO:

OUTGOING WIRE

PAGES

OF EFFORI'S ARE CON'l'~l.P.LA'l'_!!;l) .tiY .t'.tiUVISO. FOR EXAMPLE, DO THE PAR~9 HAVE IN MIND ONLY

DATE:

CLASS OF SERVICE:

COUNTRY: BIVEAKOOWNS AND ROUT:rnE MAlliTENANCE. W'E 1vl>ULD BE CONCERNED IF VRA WERE

TEXT: THOUGHT TO BE REQUIRED TO TAKE ACTION AGAINST ITS OTHER CUSTOMERS. Cable No.:

(iii) fflf.A,T IS THE RATIONADE OF GIVING VALCO THE FIRST RIGHT OF REFUSAL

ON THE ADDITIONAL RJWER? IMPLICIT IN THIS CLAUSE rs THE ASSUMPl'ION THAT

THE CORRESRJNDING REVENUES FROM VALCO FULLY OFFSET THE ECONOMIC COST TO

GHANA FOR SUCH !'RE-EMPl'ION AGAINST A LOCAL nIDUSTRY. DOES THE GOVERNMENT

AGREE WITH THIS? BESIDES AS WE UNDERSTAND IT VALCO'S DENDER.$ ARE APPARENTLY

ONJX R~UIR.lm' 400 MW FIRM. (iv) & ( v) THERE IS NO RATIONALE FOR VALCO t S

OPTION TO INCREASE THE rowER CEILING FURTHER FROM 400 MW TO 415 MW SINCE

VRA DOES NOT PRESENTLY KNOW THE COST OF NEW PROJECTS BEYOND KRJNG NOR THE

ALTERNATIVE PRICES OTHER CUSTOMERS WILL BE WILLING TO PAY. SUCH FORWARD

SAU'.$ MAY WELL PREJUDICE VRA'S CAPACITY TO RAISE LOANS FOR SUBSEQUENT

FOWER PROJECTS. WE CANNOT IMAGINE WHY THE "CURRENTLY PROJECTED AMOUNT"

WAS NOT DEFINED. (vi) TWO R)INTS ARISE. FIRST, THE DEFINITION OF "DELAY"

m COMMISSIONING VRA 's NEXT SCHEME (KroNG) IS NOT CIJEAR. AS STATED

EARLIER VRA MAY NOT BE ABLE TO OFFER MORE THAN 370 MW TO VALCO BEYOND

NOT TO BE TRANSMITIED

AUTHORIZED BY: CLEARANCES AND COPY DISTRIBUTION:

NAME

DEPT.

SIGNATURE----,--------,---------------1 <SIGNATURfi OF INDIVIDUAL AUTHORIZED TO APPROVE)

REFERENCE:

ORIGINAL (File Copy) (IMPORTANT: See Secretaries Guide for preparing form)

For Use By Communications Section

Checked for Dispatch:------------

Form No. 27 (3-70)

INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION

TO:

COUNTRY:

TEXT: Cable No.:

OUTGOING WIRE

PAGE 4

DATE:

CLASS OF

SERVICE:

1 978/79 wrrHOUT AFFECTJNG ITS REVENUES OR JNTEREST OF OTHER CONSUMERS.

SECOND,~ CONSTITUTES 11NECESSITY OF CURTAIIBENT"? IS IT IMPLIED THAT

VRA WILL MEET FIRST THE DEMAND OF ITS OTHER CUSTOMERS? IF SO, THIS SHOUID

BE MADE EXPLICIT. NOTE THAT (A) IF AT JANUARY 1, 1980, VALCO HAS EXERCISED

ITS OPTIONS UNDER (iii) TO GO UP TO 415 MW, VRA WILL ONLY BE ABLE TO CUT TO

385 MW AND (B) THE REFERENCE TO FORCE MAJEURE WILL RELIEVE VRA OF ITS

OBLIGATIONS TO SUPPLY R)WER ONU IF THE TOTAL OUTPUT OF .AKOSOMBO IS

REDUCED AFTER JANUARY 1, 1980. THio IS SO BECAUSE VALCO WILL HAVE THE

RIGHT TO SAME ffiOR)RTION OF VRA'S NON-JNTERRUPI'IBLE FOWER IN 1980 AS IT

TOOK IN 1 979, AND ffiESUMAB:CT ALL AKOSOMBO roWER WILL BE FUr.r;y COMMITTED BY

1979. ARTICLE 3 (A) (i) REFERENCE TO THE MEMO OF AGREEMENT OF JANUARY 28,

1974, SHOULD BE SUPPLEMENTED BY REF:EllENCE TO THE RECENT AMENDMENT OF MAY 8,

1975. (ii) THERE ARE TWO MAJOR ffiOBTEMS WITH THIS SECTION WHICH HAVE

ffiIMARILY TO DO WITH FUTURE FIN.AllCING OF KR)NG: (a) CONTRACT RATE WITH

A CEILING OF 8. 75 MILLS/KWh AND (b) NO SAFEGUARD AGAINST INFLATION AFTER

THE DATE OF COMMISSIONING OF KFONG. VRA 1S OWN FOSITION HAS BEEN JN FAVOR

NOT TO BE TRANSMITIED

AUTHORIZED BY: CLEARANCES AND COPY DISTRIBUTION:

NAME

DEPT.

" SIGNATURE---=----~-------------1

<SIGNATURE OF INDJVIDUAL AUTHORIZED TO APPROVE>

REFERENCE:

ORIGINAL (File Copy)

(IMPORTANT: See Secretaries Guide for preparing form)

For Use By Communications Section

Checked for Dispatch:------------

Form No. 27 (3-70)

INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION

TO:

COUNTRY:

TEXT: Cable No.:

OUTGOING WIRE

PAGE 5

DATE:

CLASS OF

SERVICE:

JULY 28, 1975

OF A FOWER RATE COVERING THE FULL COSTS OF SERVICE AND DOES NOT SEEM TO BE

CONSISTENT WITH THE PROPOSED PROVISION. THE ADDITIONAL 30 MW FIRM OR 1 5 MW

INTERRUPTIBLE FOWER SHOULD BE COMMITTED TO VALCO ONLY IF VRA GEI'S SATIS­

FACTORY RATES lNCLUDING A BUILT-IN ESCALATION ARRANGEMENT. IT DOES NOT

SEEM TO BE lN THE INTEREST OF VRA TO ACCEPT A CONTRACT RATE FOR THE

ADDITIONAL FOWER WITHOUT MAKING EXPLICIT AS TO WHICH COST ITEMS ENTER THE

PROJECT COST CALCULATIONS (RESETTLEMENT, CAPITALIZED EXPENSES, INTEREST ON

EQUITY DURING CONSTRUCTION, ETC.) AND ASSUMED RETURN ON CAPITAL. (iii)

COMMENTS ON CEILING PRICE AND ESCALATION FORMULA AS ABOVE. (iv) WE TAKE IT

THAT "ANOTHER INDUSTRIAL CUSTOMER" MEANS THE CUSTOMER WHOM VALCO HAS PRE­

EMPI'ED. ALSO WE ARE CONCERNED ABOUT THE VAGUENESS OF THE Hrn.ASE "TAKING

INTO CONSIDERATION THE DIFFERENT I.DAD FACTORS" AND HOW THIS RELATES TO

THE "MINIMUM CHARGE" (SEE COMMENT (C) ON ARTICLE 4) (v) SEE COMMENTS ON

ARTICLE 2 (iv) AND (v). ARTICLE 4 AMENDING ARTICLE 13 (B): WE ASSUME THE

NINTY FIVE PERCENT PROVISION IN THE PARAGRAHI FOLI.DWING THE TABLE IS NOT

AFFECTED BY THE AMENDMENT. TiffiEE QUESTIONS ARISE: (a) WHY HAS VRA AGREED

NOT TO BE TRANSMITIED

AUTHORIZED BY: CLEARANCES AND COPY DISTRIBUTION:

NAME

DEPT.

SIGNATURE_--::--~----------------1 CSIGNATURE OF INDIVIDUAL AUTHORIZED TO APPROVE>

REFERENCE:

ORIGINAL (File Copy) (IMPORTANT: See Secretaries Guide for preparing form)

For Use By Communications Section

Checked for Dispatch:------------

Form No, 27 (3-70)

INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION

TO:

COUNTRY:

TEXT: Cable No.:

OUTGOING WIRE

PAGE 6

DATE:

CLASS OF

SERVICE:

JULY 28, 1975

TO REDUCE THE TAKE OR PAY PERCENTAGE FROM NINTY FIVE PERCENT TO SIXTY

PERCENT IN RESPECT OF UP TO 45MW? (b) lF VALCO IS PAYING A HIGHER RATE

THAN THE ARTICLE 12(A)(i ) RATE FOR FOWER DI EXCF.SS OF 370 MW BEFORE KFONG

COMMISSIONING, WHY IS TAKE OR PAY. LIMITED TO THE BASIC CONTRACT RATE

(ARTICLE 12 (A)(i)) FOR FOWffi DI EXCESS OF 370 MW? (c) lF VRA WTIHHOLDS

FOWER FROM ANOTHER INDUSTRIAL CUSTOMER UNDER ARTICLE 2(A)(iii) AFTER

COMMISSIONING OF KFONG WHY SHOULD VALCO NOT BE SUBJECT TO A TAKE OR PAY

RATE OF MORE THAN SIXTY PERCENT FOR FOWER TAKEN FROM OTHER INDUSTRIAL

CU.STOMER.? SIDE LETTER ON CONTRACT RATE PLEASE ASCERTAIN WHETHER "CONTRACT

RATE" REFERS ONLY TO THE 12 (A)(i) RATE OR utEX ALL RATF,S. IF IT APPLIED TO ALL RATF.S IN ARTICLE 12,

AND A SDIGLE RATE WERE AGREED, THIS WOULD REDUCE AMOUNTS CHARGEABLE FOR

FOWER BEYOND 370 MW. THIS RAISF.s THE QU:l!STION WHETHER THE DEFINITION OF

"CONTRACT RATE" IN ARTICLE 12 IS .ADEQUATE. WE CANNOT FORMULA.TE ANY VIEWS

ON THIS LETTER IN ITS PRESENT FORM UNQUOTE

DUTT rnTBAFRAD

NOT TO BE TRANSMITIED

AUTHORIZED BY: CLEARANCES AND COPY DISTRIBUTION:

NAME

DEPT.

D .DUTT, DIVISION CHIEF, WAPIB

WAPIB

SIGNATURE-----=------------------! <SIGNATURE OF JNOIVfOUAL AUTHORIZED TO APPROVE>

REFERENCE:

ORIGINAL (File Copy)

(IMPORTANT: See Secretaries Guide for preparing form)

DDutt/Alber: cb

For Use By Communications Section

Checked for Dispatch:------------

' .,

(

T

J -: (

- J

I

'(~-'' ~ • I I

' (

I .· - J_

( ' ( t \. • I

'( - ' • I

(

r. 2Jt:' (.)

C ',.

·-

(

~:: 19i5 I; ,~ ,,

:( \ ( . ' . .- '

)_' .

Mr. Roger Ch..aufourllier

Devbrut Ibtt

. -~•.

• ...

~l,o.~ ~ ....... d{.O(.,~

{ t. cJ._o~

July 28, 1975

1. Mr. ~1.right' ::i .r.1emom ndum of June 20, 1975 addressed ·t.o Mr. K'.n.!:1.pp ( r.lip nAn) Bur.ima.rized the stat us of [Jong hydroel ectr i c ~ojee1~ ar.d th,! i sr::uets posed by the draft docWJents to en~nd the 11Ms.5to r A"rccnent 9

for s1le er' ·,;_".Ji. pci-:01•. In accordanc 3 with tuo r,ro:,osal recorded in .,'lt,ra­graph 10 cf t:B nemo:: .. andum, a mosion includin:; Hess;:•;;; . ~iibi , .~i tt~r c~d !:l,;t3elf ravio;:-..::d th~ drait docur-ents uith v .. 11 ic.r..d tbe Ooverrcont (D ..... I·'oro1~r) in the !"i rst, 'l-roek o f July . Doth VJ.A and t he Govcrr~ont agreed ui t.~ U/3 that t he proposed powor contract rui~es fa1• raaehin:; i::;sue:J , ar no t; in tho i nterest of Ghana and could prejudic:? the ch--ncse of l'O.ining m .. "tem.::il. asoistance for tha l')on,J project . Accordi1Y~ly they ha.-rn l"OO?ened nc;;;otia­ticns uith V i.LCO . "/"\They also requested the 13.:.nk to ID.J.k9 .avail~ble tl:.c l-Jj.'itton CO?'l:':..ntr; /t.J~:::.t tbeso could bo used intsrilally rr:r ~.Jw Cfa,,.nai£ill.s. The o:.•.:::._ t cable ~.u:n:u ·iz~:J OLtr cor:::liJnts on the d.::.'.:i!t fourt.:.1 ~?nd.?OOnt to r.-owcr contl~..i.ct and hr.1::. been cletAred with tha Leg~l, Central .::.nd J.~~io:».tl r'rojects D0 pa.:t't:nent:; .

2. Bet,ideo rcopeni..~g o.f the ncr.;ot1£:..tian::i, t\...ro de•1olu;xn•:lfl'l;.s hav.:, trurnn place c1ncs :::: . ~::•lr;ht [-U:.!.11ri::ad th.:! r.-ositic., in his r.:~:'l() ol' ,JiJ.n,? ;\J {f:li') 11 A"h m'.,', t,dt:c:.r's conments on· .:"h1wr10::it. stuaia.:.t (rc.forcnco :.'i1I\J..-

gr .• ·.h 8 O.f l.r·:~-:-:ri·~h+J 1 f, !1..:t:10) haye b:::cn l'.!C,.;'i\l'd ,J.f.O ::~·C'.:l to h.J a :r~j~Ct1.Cn of Ll:.1) b,rnic ;)o:i.r1tc u.:~1.J::; by tL.a cor..!.>ul w.nb (:-,...;J.11::17, n_ 7i~i.on oi' th~; crmtr.act r.:.:.t.-1 .t.:'Cl!l cur:~nt 2.f'$ Di.llz to a:::\.Uf!d !) ni:!.2.,;~ .1!:;, 'i...',:-J.l Dtl th11 ':::"OVi'.·to,1 .r.'Ol'

u ::"u~ura D.c1.ce v.Jju::;t:-:i.·nt cl.:.u.se) . ·.···0., C.:.r:..:t..i~·v; {cr~1 t-bi'f) h:..r.-l :!.11.,:orn:;:.:l UD t!1.'.it th-::ir m. •• n<.!1?,.,:;:'.nt ie oc2iori:1ly c0:-.. ccr:; 1<1 ii.t t:1:~ :J1'0'.)0'·2d nrrc111 ·~-:;ul.!1;:t .. ~ for ~:.l\:~.r:.c3 ::::.1J.e o ... · 1;--.~r1'~ ;:oir'Jr to l.:.~~J../~t;., ··~cl i.f cca1cluded 1nll o..a.ke it, Lri_«

:posnible l'or c;I:JA to ;joi:1 t..~o B-.:irlc in co-.Ii:: .. r.:-in_--:: i :;orG.. I h,..:.vo f,u.·:::c.::-; t::-tl to Cifti. ,t:.,,.:££ th1.t w>J.le ur• r!J.Y eont.inU:! to 1: :!8i1angr.; vicua on ::.ur l"t:~')ot:ti ·ro :x)~i t,i.ons l t u'l11 b'1 r .. c;vi:3t.lJ.ia i'or t.b::. C,:mL:dL·~.3 w c.Y.:).rass th0ir co:-,c.om direct~ly to C-ha?lU .

i) Tf ,t D.ll possilJ.} f~ G:1,.r:.a. f;!10•.L.l~ 1~,nc::u"i.i..:.te the II contr.::.:::t 1,ticon ,.:.r.d 1111.rr.) . .:it;v)o ;::-.. .::1: l~l;! c .;jl!::.., .. J:i.Jr1t, .-~Lrrtir~;::!:t.;-1:.t 1·or1

t!1s t)~~~c .37(1 ~ ,.,¥ ; {'~\Jr he:~o:"'o ~ ;,~ .J-!'!d tr...,.; l-~12- ~· c0~Jf-: C'f · ll~ ,:i'.l.a&tcir A!_;ree~.mt•1 •

Mr. Chau!ourni !lr - 2 -

ii) I!' thoy aro ccmpel1 ed to co~;;:1.c.de ealc contrac'ti for

. ... , .

lfvO J.t·l po mr u.t.· thiu :.t.a-~e c =~~ir.;crs rJa:y thJ.t ... hey could not concluda finn.nc::.n: at":r-.::.i-: ·~:" Lts :·er t:1') fifth pot- · line witho t the ext!"- JO :.1) · n~ VJ:. r:u~t r~eiotia.te a satisfact ory r ate. . .;hlc;.1 rcflt:ct:) t. e co~te of !pon3 pc:.;u ••

iii) Th~re is no justifk.:-.tion t~c..t:::o · var for' :: ·king any cc t­Ment. for c.:J.c o.f r,o;·.,r ov~r _-;_~ r·bovo 4'}J L.l at thic sta.~13 1

, hen V.R.A doe ... not kry··.1 the r:.~~in1l cost of po· er fro~ projects eubse,ucnt to K?O! ~·

iv) ... 0:1') point, of det ··n--likr.- t::-'·.:!-or- pay obi.:1.·~ation o:..' VALCO, pi:-c-oi:i,,"Jtion o .. su 1..-.' ;.,- o in f~~· :J~· cl' V.A.LCv-h,:i.ve: been w~ ted on.

At tachll!ent

cc. He•"'oro . Bau'1 fruric..li;/3c· tt, I...::.•g ,1 TI..1i·i'.t"'r, :\r r·. ;11s!;ic •; Ac~ ... lkin · ·.:er, I.- ;;~

\ ir cht. ( ah ) r.1--J i: it?. ( o/ r) J,_nnin-:;t. !"!o :l~:1

Kin1 :ti.bl (c/r) DJ.vi...;/1;.lbc.::-G. nn to.~:.,~. ·

July 10, 1975

Dear Mr. Hamilton,

Ghana Power Study

Thank you f'or your letter of July 4, 1975 and the information which you enclosed. We are at present studying this information and will contact you should we have any queries. ·

Yours sincerely

J.G. Davis Acting Chief

Public Utilities, Pl-ejects Division Western Africa Regional Office

Mr. W. Hamilt on Executive Engineer Acres International Limited 5259 Dorchester Road Niagara Falls Ontario L2E 6W1 Canada

/~es/it.

Cont. GHA VRA-5-9

World Bank 1818 H Street Washington, D.C . 20433

Attention: Mr. Robin W. Bates Economist

July 4, 1975 P3796 '1

Gentlemen: Ghana Power Study De jJ_ I l.0707 In accordance with your request at our meeting with CIDA in Toronto on June 19 and 20, we enclose dai?a. on cash flows, thermal fuel consumption and related pertinent economic factors for Alternative Generation Plans III, IV and V. We trust this data will allow you to p erform the analyses you require.

If you have any queries concerning this data p lease con­tact Mr. Cliff Brown or myself in Niagara Falls.

WH :dj Encl.

cc: Mr. P.J. Harkness

Al RE:S NTE-R'°IIA 10 AL LIMITE.D 5'1<,fJ Do 1.. 1ester Road PO Box 1001 "J £1!,drci rat s, O'ltario L2E 6W1

Yours very truly,

W. Hamilton Executive Engineer

JUL 9 1975 Oate Rec'd._ ~

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... • Peter Wright. Acting Vlc& Preaid nt. eatern Africa ·'

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~

1. In the 19603 the Bank o.ssisted Volta. River Authority {VRA.) to develop the hyd.ro-l)Otential of Volta river at Akosombo through t'10 loans (t47 million in l9G2; ~G million in 1969). Tho U.S.A., the United lCingd.om, Cs.natl.a and Italy al.so participated in financing the project. When the second Bank loD.?1 was mooe, it vaa anticipated that VRA vould need 8.l'~ther hydro-project to meet the market dema.nd for power beyond 1977 • end Kpong { located 15 miles downstream frot'\ J\.kosornbo) appeared to be a likely' choico.

2. Yith Canadian assistance, eonsultanto (Acres Interr.ationa.l Limited} hn.ve since completed a. drai"t study" to det~-'"Ini.no a generation ftX-pnnsion program for VIlA and have concluded that the Kpong hydroelectric plant re:p!'esonts the least-cost solution, and furthor that it should be eommisaioned in 1980. The report also sur-,gests that Ghana will be facing

J)O'A'er shortage ey about 1978 and recoUL'llends gaa turbiner, aa an interim eolu-tion tor meeting the demand between then and 1980. The shortage vil.l b\l acute it the full additional der:iand troll VALCO (see ~agraph 6) is to be met. by vnA, but even 'Without that demand Kpong \fill b0 needed by 1980-81.

3. · · Looking ahead to the early 1980s, Kpong seeraa to offer the most eeonom.ica.l means ot supplying the incre!i.sing delll8.lla. for 1xmer in Ghana.. Hovever, vo estimate that the earliest K-9ong could become opera.tional would be in 1981. If Bank Group financing is involved (see paragraph 5), that vou.l.d require field appraisal. in ;Iovember-Dccember 197'.J 9 ri th prescntntion to Executive Directors a.round. the middle of 1976 as soon as realirlic estiraa.tes of the cost of the da!ll, power house and connected eivU , orka a.re available on tho basis o: evaluated. bids. •

4. · . · The conmultants estimate the cost of the project at t11149 million ill Jammry 1975 dollars• or .;:242 oil.lien in current <lollara for conurlssion­ing in 1981. This vould be aoout $100 million above the estimates ve ere working on a year ago at th"' tima of' tho last CPP reviev on Ghana. The relevant 'bre:l.kdovu ot costa is summarized belovt

,.:..,-·

' r

/

.I

..

, .. ~I

• • Burke pp -2- Juno 20, 1975

Total ForeiEQ! ($ million) -

"" I 62 i.2

35

11

, Civil worka

MiBCellaneous (resettlement, prelimina17 rk, etc.) . ,,

• i

Interest durint', construction

Total in J nu8.17 1975 dollars

With estimated aeala.tion

. -.

"

3T

" 1

2

20

11'8

242

-2

13

103

2.6T

5. Because ot the experiene~ vith such ~red.its in too past~ the Govcrmr.ent has decided not to contrnct suppliers' credits for this project

d. haB sought the good offices of the Bank in puttin.~ together a financing :pnckage involvin.g long-terlll loans. Cruv.w.o. has expressed an interest in assisting through concessionflr,Y finance from CIUA and hao tentatively

.:.. ~f'fered a.round $30-35 million ror the :projc<?t. We have rcc01UL1ended the project to the Kmmit Development Fund and the Arab Dank for Economic Development in Africa and pro"?<)se to sound out also the EuropP.an Developl:lent Fund with a vieir to their co-financing the project with ua. Ghana. has also

ounded Iran, U.S.A. and It-aly for long-term los.na . While the.re is a. definite interest on the pa.rt of some.of these lenders, the co-financing exercise vill require ~ubat.:llltia1 staff involvement and is not likely to be completed before first quarter of 1976. The presently ~pproved B:inlr. • Group lending program :provides i30 million for the financing of Kr.,ong in F'l11, and v& shall vant to reeon:aend increasing this U:P to $50 million, it necessary; to put together a rin.e.neing plan that vould cover the

· increased cost of the project ..

Pover Demand of Volta Alumni~ Comnay (VALCO)

6. ln the early 196011, as you will recall, VRA entered into a long-tona contract 1rith VAfl;O for balk sal~ of power ; acceptability o:f the 1'1.f!Ulter Acreement" betvecn the :parties va:5~ a condition of effectiveness

· ot thct first Ban'.t loan. Currently VALCO usen 315 t.r,1 ot Akooombo :tir.n

- - ~-- ~. -

I

I

J 'j l

'I ~ • I ),:;'

June 20, 1975

·'

capacity o-r about 600 l , and VALCO ho. ereieed it or,tion under th9 "Master Aereeinentn to bey t> .. 'lother 55 }.~. brin,;ing the totru. to 370 MW.

~ In adJition, VALCO h.aa sought co~tment from VRA for supply ot a further ' · 30 MW tirm and 15 }fJ inte!'TUJ.itible. Thls aJ.d.itional po-lier will be required . tor f'ficient operation of all tb<: five -potlinos VALCC expects to ba.ve in

ervice by 1977. corurt.ruc'tion ot the .fifth 1:)0tl.ina was started roeently, but bae nc:;t ret boen 1'in1l7 npp:rovw. 'by- the Govenme.nt.

T. The ~.aater Agr~tH oblieea ·VP.A to sell 370 WI at 2.625 US mill• per kilo'ffl!l.t1. hour,. but VALCO e.._i;reed to r!'.isc the rateG to 2. 75 111illa 1n October 1972, and there a:s turther ''interim increa.oe11 to 3 .. 125 mill etrectivo March 1913 (subj~t to a r.1eili~ pa~ of $1.95 million). ~ .has uov present~<l. to the Govermient and. the Bank for ... heir eerly :ppro'ral a. set ot draf't docut!lentn relatoo to the construction of the fifth

potline . On of thes.z is an amendment to tho existing power eontraet covering the qus.nti ties and prices of future 1mpplics of -power by VRA to VALCO. The ~ring documents deal. mainly vith l'!iiaing loans required to f'inaneo the potllne. the tota.l cost or which ia estima.tec1 t around ~6o-TO ro.lllion; tha U.S. E:rport-Ir.r-J:-A,>rt Bank lilOUld b~ one of the lenders.

(

!Ml'! llorld Bank' con.neut to an nm.endment of the pover contra.et (and. to aome ot the other d.:,c\1Cl8nta) i required under t:tle t :rm.e of our loan Agreement with VBA.

6. As fOU. knov,. ve have never been 'fft:ry happy with he pover rate being cb&rged to V!J..CO under the :-iHaster .Agrear.ten, 11

, snd as e~rgy cost ve risen all arO".md th& vorld~ t.hb ra.te 'haB become more sn".l more out

of line vith lJ()Ver charges elsemio~e. VRA is not yat in teehnical breach ot the rate covenants w:dor o-.ir loons. but could soon ooeome so. V.ALCO and ~ h.a.va _JoJntl.y_ f'sked eonsulta...ts (oha.VI!lont, Canada.) to undarte.lte &

tarift study and to m:,.ke recom:m.en<ia.tions on appropriate rates. The Bank

(

vas consulttd on th ten;w of reference of' the study. 'Ihe draft study · concludes that: (a) the rate should be iilcreased. to 5 nills/kvh (early

197>i prices) until V.A.IFwO' s lood increases to 370 NW, vhen it 3hould bJ.? reduced to 4 Jnills/kwh; (b) the rat~ should be a,ijusted amiua.llt to take into account vari!l..tions in exchange rates and infla.tifm; and (c) tlle rat

h-ould nevf'!r excee-d 2 per cent or be less t~1e...-, 1 per cent bf the price ot one pound o:t e.lumitiw:o. ingot. These conclusions, and the methodology on 'Which they nre based.J are di1routed by VAu:;o. We have a. number or q\lestions

. about the w.ldy' ourselves~ but our prP.l.irninary viov is that the proper rate for Akoaombo pover mig.h\ indeed be o.round 5 mills.

-9. < 'i'he ~nd.meat pro1)09ed by VALCO to the ~r contract envisages th continuation ot tlla 2. 75 mill rate for the first 3'i0 11w· ot power supplied by VRA, eubje-et to poasible rene~tiation of the!le rates lat.-.,r on wh~n th Slls.VtJOnt study has been finalized. Higher rates could be concidered for the additioncl. 1'5 !M which VALCO lrould like to buy; those rates woci.d be related

· to the eost of povnr w.p:;;>l.ied from Kpong - 'l.lbject, hcvevo.r, to ceiling

' ,

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June 20, 1975

.•

which is vell bolov what lra vould expect to bo the a.Ten.go eoat of Kpon.lJ "'pover. Strictly, ur.,ler the terms of the "Master Agreement u, th'! power

1 rates charged to :VALCO CM be i~reased only vi.th VALCO's con.sent, am\ .' VB.A 1$ obliea,ted'to supply 370 t<fi at the lower rstea. In these circum-. . stances we would c-on3id.cr it hi~ inadvisablo for the Ooverr.-ment to

accept the nev draft power contract aa a basis for proceeding vith t~e tif'th -potlin.e, which 1ru1y bring relatively little benefit to the economy of. Ghana (a:-.L'Clng other things the VlJ.CO propoa.!l.ls cont.em:plate a. chtlnge- in the tax base vhieh ,rould S!l1)ear to 'te di~fadvante.geous to Oha.."la - not thn.t Ghana stands to obtain l!lll.eh by wey of trut revenues h'om VALCO nnyhow). , ,

10. Au the Ba."lk hu been requested. to cl~e.r the draft documents at sbort notiea,. ve vould pro:poae to procoed as follows;

(a.) Firnt e.se-ertain vhat the Go-vertll!\ent•s position is, W'hile ~ ti c1ear that w"'8' have strong r ezervations about ths edviesbility of the:!.r giving th~ir consent to tha :prop:;lsed a.rra..'1.ger<tenta for- too fifth ,. .. potline 'Without V}{A having first ne50tiated. vitb VAI<.:X> a revis~ bG.sis tor tu.tu.re power charges~

(b) send a. mind.on to Ohena (plru,ned. for July l) to conoult vi.th "VP,A nu::1 t.he Governm...ont on the conclusions to be drawn from. the Shav.mont atu.dy '\rith respect to the tc.ri:ffs th::it eau o.yproprh.tely be applied to the 370 i-'U of power tha.t VAL.CO vill get tl'Qm Akoso.nbo e.nd at the sa.ue tlJ'Jl..'t to discuss tbe rutes for thf) additional power to be BU.pr,licd from Kpong,

/

etarting !l'Oi!. the :position that the J3ank will ha\rl.l to be satiafied on the . ~nac7 ot tllosa ratea il it ia to participo.te in tbe financing of K'l'Oll<;H

(c} continue to G.dvine Kaiser's that the Bank cannot give its co:isent to the 1'1:!Vised l)OW'er contract without f'ull :prior conoultation with tho Gov-0rmnent.

U. r:'he Oovernm.ent has aJ.ready.fnto~ed. us tbrou.gh Mr. Oyasi-.'l'wum that it has not yet taken a decision to api?Z'OVe the ~ifth potline ~· and that it vould exp...~t to be econsulted by the Bank before we reply to the letter from VALCO seeking our con£ient to the a."llendment of the pover contract.

• Meanvhile. Mr. Ward. Saundoro, the Vice President of K.niser responoibJ." tor VALCO, MS Ql'ged that w-e do everything possiblo to expedite me.ttera sinee they aro counting on closing tha financing a.creenents in Accra on Monduy, Juno 30., I have ccnveye~ to him ou:r doubts about the real.isa of thia date.

( .

12. It would appear from 'W'ha.t ve k:nov toot VRA bas encouraged VALCO $o expect tha.t the Government lrill be ready to approve the })ropooed arranrt<r menta for the fifth pot line, including th~ revised drClft pover contract. 'rhia is certainly the sense of the minutes ot VRA's ls.at Boa.rd Mooting on March 25, vh.ich Mr. Ward Saunders read to !.le over the telepho:zu,. Ya ca n therefore expect a. good deal. of pressure from KAiser's and are still tar trom clear an to lrt'te.t the Government'o position vill be . t

.. : . ... . "' ·~ . . ·· · 1 '

.... ..

r 1. I I I l !

-··

_,_ June 20, 1975

·'

f\,.

1 13. This u;iemorandum b tor your information l'tt this sta.10 . We vill keep you info?'rl!Qd of developmenttJ and vil.l cooie forvnrd ,.,ith more precise

· proposals tor the financiil/.l of Kp~n.~ af'ter aasessing the prospects for co-financing. llovever, if the Govc,rrulent nhou.ld go along vith "lfhat VAJ..£0 ia proposing• v might hs.ve ditficultiea in tinS:.ncing the project a.t all .

Cleared vith ( irl ubstt.llC ) o.nd cc, Mr. Tbalvitz, WJu>

CCf M&ssrs . BaUJ:1 Nuriek/Scott, Legal

1 Dutt, WAl R itter, Rso. 1-U.snion1 Ghana

DDutt/EPWright :0rl

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June 26, 1975

Ohanai uthori ty - Lo 618

' th hi letter of MaiY" 1, 1975, • tsi

fro Acres making change in their draft r ort on the ansion study. In the ant:tme, we have h the opportunity of dis-

cussing both the draft report d the di tional or da with Acre in Toronto. I shall r ort to you o the results of the di cussions with your consultants during T!f.7 imminent visit to ccra.

cerely yours

Rene A. Ribi

ff$

, Public Utilities Projects Div1 n st Africa ional Office

• .L. C ief Executi

01 ta · v Authority ccr

GHAN

RARi.bi/lm Control No. GHAVRA 5-5

INTERNATIONAL DEVELOPMENT I INTERNATIONAL BANK FOR ASSOCIATION RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUM

INTERNATIONAL FINANCE CORPORATION /

{;j,Cl-t•O.. - / 0 .:l- 613"

TO: Files DATE: June 25, 1975

FROM: Devbrat Dutt ~ hief, WAPIB

SUBJECT: GHANA: VALCO, VRA and the Fourth .Amendment to the Power Contract

1. At the request of Mr. R. G. Tunnel, attorney for Kaiser Allllllinium and Chemical Corporation, Messrs. Reitter, Asser and Dutt met him on June 19. Mr. Tunnel requested the Bank to ~rocei:>S expe­ditiously a revised request for consent (copy attached), basically adding "the "Fourth Amendment to the Power Contract" to the list of documents requiring formal consent of the Banlc.

2. Mr. Tunnel made the following points in explaining their request for expeditious Bank clearance of the draft documents:

a. Kaiser had advanced $16 million to VALCO for the fifth potline and this amount will be utilizea by June 30, 1975. VALCO has arranged to borrow $50 million for their fifth potline and unless these documents are formalized by that date, the enterprise will be short of funds to continue its expansion program and there could be tax complications.

b. The documents refer to the expansion of the rated smelter capacity of VALCO from 300 MW to 400 MW, even though the master agreement limits the VRA obligation for supply of power to 370 MW, because with out the higher figure of 400 MW there could be problems in raising money from the financing institutions. Accordingly, the fourth amendment to power contract is an integral part of the package VAJ.IJO proposes to settle now.

c. Both VALCO and VRA have commented on the draft Shawmont study and Kaiser will be presenting the Bank a copy of their comments. Mr. Tunnel expects the consultants to take about six months to digest these comments and, in the meanwhile, VALCO has agreed to increase the ceiling payment from $1 .95 million to $5.5 million (i.e. the interim increase to 3.125 mills effective March 1973 will continue to be paid until the extra payment--over the base of 2.75 mills--reaches the ceiling of $5.5 million).

Mr. Tunnel clarified that the consultant was not an arbi­trator but its report will carry a lot of weight. VALCO is of the opinion that the power rate should not exceed the amount required by VRA to earn a rate of return of 8 percent.

- 2 -

d . Mr . Tunnel stated that VRA is willing to increase the supplies to VALCO to 400 MW at the rates indicated in the draft amenament (i . e . a ceiling of 8.75 mills/kwh for 30 MW firm and 9. 75 mills/kwh for 15 MW interruptible power) . If Kpong is not commissioned by 1981, VRA would be absolved of the commitment for this additional power; however, most of the financial institutions lending for VALCO's fifth potline would be repaid substantially by then and therefore not undertaking a major risk under the proposed arrangements.

J . Mr . Tunnel suggested that the Bank may give its consent with suitable disclaimers . We stated that we would wish to ascertain the facts from VRA. and consult the Government before reaching a final decision .

cc: Messrs. Wright

DDutt:crm

Thalwitz Heininger/Asser (o/r) Reitter Ribi

Form No. 27 (3-70)

INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION

TO:

COUNTRY:

TEXT: Cable No.:

AUTHORIZED BY:

NAME

DEPT.

BOOK OF TWO

QUARTEY VOLTA RIVER AUTHORITY ACCRA

GHANA

OUTGOING WIRE

i) INTBAFRAD ACCRA

DATE:

CLASS OF FOR MONTH.ALI SERVICE:

(.!~ !;;ct' /6tf)

REFERENCE MYCABLE JUNE 23 RE LOAN 618-GH SINCE

.AMOUNT/RECEIVED REGARDS

IXJTT

INTBAFRAD

NOT TO BE TRANSMITIED

JUNE 24, 1975

LT (4498)

;If

CLEARANCES AND COPY DISTRIBUTION:

Devbrat Dutt, Division Chief

Western Africa IB

clearance and cc: Ml:'. Watanabe, Treasurer.! s

DDutt:cnn

SIGNATURE-----,---------------------1 cSIGNATURE OF ll'U)lVTDUAL AUTHORIZED TO APPROVE> /

REFERENCE: For Use By Communicatio,<s Section

ORIGINAL (File Copy) / . (IMPORTANT: See Secretaries Guide for preparing form) Checked for Dispatch: -----#-----------

( I I J - i '\ "~ s

form No. 27 (3-70)

/c INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION

TO:

COUNTRY:

TEXT: Cable No.:

AUTHORIZED BY:

NAME

DEPT.

INTBAFRAD ACCRA.

GHANA

FOR MUNTHALI

OUTGOING WIRE

DATE: JUNE 23, 1975

CLASS OF

SERVICE: LT (4498)

FOLLOWING CABLE SENT TODAY TO QUARTEY QUOTE RE OURLET

MAY 12 SERVICE PAYMENT LOAN 618-GH STOP US OOLLARS 18,506 DUE

JUNE 16 NOT YET RECEIVED STOP MORGAN GUARANTY T1iUST COMPANY NEW YORK

UNABLE TO TRACE RECEIPT YOUR INST1iUCTIONS JUNE 3 STOP PLEASE

INVESTIGATE AND ADVISE UNQUOTE REGARDS

Devbrat Dutt

Western Africa IB

OOTT

NOT TO BE TRANSMITIED

CLEARANCES AND COPY DISTRIBUTION:

cc: Mr. Watanabe, Treasurer's

SIGNATURE --:-;:;-:-=-:-:--=:-:--'-=-:---""""""--,,-----------I <SIGNATURE OF (Ng.LVIOUAL AUTHORIZED TO APPROVE>

DDu.tt:crm I REFERENCE: For Use By Communicltions Section

ORIGINAL (File Copy) V (IMPORTANT: See Secretaries Guide for preparing form) Checked for Dispatch: ___ _,1'-----------

7

JUN 23 6 1\ f \915

( -

form No. 27 (3-70)

loo.-- 6 /g'

INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION

TO:

COUNTRY:

TEXT: Cable No.:

AUTHORIZED BY:

NAME

DEPT.

QUARTEY VOLTA RIVER AUTHORITY ACCRA

GHANA

OUTGOING WIRE

DATE:

CLASS OF

SERVICE:

JUNE 23, 1975

LT

RE OURLET MAY 12 SERVICE PAYMBNT LOAN 618-GH STOP

US IDLLARS 18,506 DUE JUNE 16 NOT YET RECEIVED STOP MORGAN GUARANTY

TRUST COMPANY NEW YORK UNABLE TO TRACE RECEIPT YOUR INSTRUCTIONS

JUNE 3 STOP PLEASE INVESTIGATE AND ADVISE

Devbrat Dutt

Western Africa IB

NOT TO BE TRANSMITIED

DUTT

INTBAFRAD

CLEARANCES ANO COPY DISTRIBUTION:

cc: Mr. Watanabe, 62:acxkiw·rbt Treasurer's

SIGNATURE ---;.:,;-::-:;-:-::;-:::::-:-::=-;;:::::-::=-:-::~~-=-------:-------1 <SIGNATURE OF INDIVIDUAL AUTHORIZED TO APPROVE>

AWatanabe:crm I REFERENCE: For Use By Communications Section /

ORIGINAL (File Copy)

(IMPORTANT: See Secretaries Guide for preparing form) Checked for Dispatch: ---------.!------I

I~ I )

C. 1J , '\.c !IC ,iJ0q S ~il ~ l h,/!

Form No. 27 (3-70)

INTERNATIONAL DEVELOPMENT

ASSOCIATION

TO: KUMAR.BANK

KUWAIT

COUNTRY: KUWAIT

TEXT: Cable No.:

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

OUTGOING WIRE

INTERNATIONAL FINANCE

CORPORATION

X 3452 9SCJ-;J.J73 DATE: JUNE 2?, )915

CLASS OF ~ I J.-f__, SERVICE/ /

REOURLET MAY 27 ITEM 12 DINARS 6,557.880 STOP HAVE BEEN INFORMED MORGAN

GUARANTY TRUST COMPANY NEW YORK INSTRUCTED NA.TIONAL BANK OF KUWAIT KUWAIT ON

JUNE 11 TO EFFECT PAYMENT TO YOU IN OUR FAVOR STOP Dill WOULD APPRECIA'IE

YOUR INVESTIGATION AND CONFIRMATION

INTBAFRAD

Late P

AUTHORIZED BY: CLEARANCES AND COPY DISTRIBUTION:

NAME

DEPT. cc: Mr. H. Davies

REFERENCE:

ORIGINAL (File Copy)

(IMPORTANT: See Secretaries Guide for preparing form) Checked for Dispatch: --+------------

JUH 2 0 9 lfl FM 1975 .OHf4UlllCATION

< • I '-

EXPORT-IMPORT BANK OF THE UNITED STATES WASHINGTON , D . C . 20571

E. Peter Wright, Esq. Director, Country Programs No. 1 East Africa Division

June 19, 1975

International Bank for Reconstruction and Development

1818 H Street, N. W. Washington , D. c. 20433

CABLE ADDRESS "EXIMBANK" T ELEX 89-461

Re: Eximbank Credit No. 5431 - Ghana Volta Aluminium Company Limited (Valeo)

Dear Mr. Wright:

In my conversations with Mr. To M. c. Asser of your Legal Depart­ment, he advised that the IBRD would have no objection to the addition of the non-payment of Crocker National Bank as an event of foreclosure under the mortgage with Eximbank still retaining the exclusive right to initiate a foreclosure. Otherwise, the Third Mortgage Debenture being executed in connection with the current Valeo expansion would be practically identical to the Second Mortgage Debenture and the original Mortgage Debenture pre­viously executed in connection with the original Valeo project and the first expansion. Unless you think differently, I do not believe any speci­fic IBRD consent need be given to this mortgage change in addition to the general consent to the current expansion documentation which Valeo has requested from the IBRD.

Sincerely,

' n (j( Gf~ ~ Jos~ H. Gain r

( Counsel

ro

FR0:·.-1:

SU LlJ EC f:

!1'·,f.:.··,,.r1rt;,~-i [i-\'c_ 1 f ,,._··.r I .. ,.r: .~ I \ r I ,:,,' ': !.j .', 'I" I"' ( : •• UIT[_,1/i,\1 /'1\\ 1 F / ~:/'.l.' ;C E. ,\ S 1 , .... ! A r ! ,, ~ ;:;;-~r . _. ~-.t_,r. r1 c,·. t•'1 r \ 1 u:- .·:.··. T c.-.:r< ·•')r·;. Ti or"

.0 .. ~ ICE-' )\/\ E 1\A CJ R /\ r,"J D LJ /\J\ : i ·~'.: -~t /"'(,'>

HeS'.:i:::'S. Ribi~, 132.te's & Tnia111 (1.U,PPi3) DA TE: Jurte 17' 197.5 ; // ,, I Y. , _ r I-! / ::;I

- . ' I Y,·, -1 _c ,r ;-

( Roger E0 n.{0e (As ::; t. Director, WAP) fa' ,,.:i ...... ?~ -

1'/ i . , {~ 1

1

1~ .,

q____ l.; 1-:-,1_ .......... Q _:_-' c::...,_:.:::~t:_:. '::·-~------t.,....'-- -Gcf..:mA - Kpong Hyd.roelectric Project ( V?J,)

.Acres Inte:rnatio;:12.l Lii:ri ted and the Sh2.winigan Engineering Co::1pany (consultants) nave completed their draft feasibility study of the Kpong pz-ojec+.,. In your me.'Tlorandum to Files dated Hay 22, 1975 you cornrnentecl on t:iia st,.1dy. Cn June ·19, 1975 you should proceed to Acres head­quarters, 'Toronto) for two d2.ys, to meet with the consultants and repre­sentatives of CIDA, in order to revie>f the missing appendices to their report and to co:np1ete your underst:mding of the fe2.sibili t:{ study. In tl-~is respect , you should focu.s your investigatims 2.i.,d d.iscussioD..S on all -items for Hhich you need clarific3tion fror.i the consult,mts, mainly t,1-ie follo,,ing::

the load forecast made by Acres: the model used for it and its justification

the e:;r..isting generating f acilities, i.eo the Akosombo hyd.roplmt, and the rLG 2.i.1.d Hines diesel plants: their ccJpacity for contri­buting to the satisf<=tcti m of future power and energy demands

the pots-ntial pmrer d evelopnents > and the confim.ation that even if the estimated costs of hydroplants othsr tha.TJ. Kpong vary sub­stanti2.lly, the priorities mentioned by Acres would still be the same

the alternative gener2tion plans, and the model used for the simulation studies

the a.l tern a ti ve development plans for Kpon6 c...i.'1d the description of the pa1·ticular d(welopmen t rec cm.mended by the consul tan ts

the construction schedule of Kpong

llIThi.am:lan

cc~ Messrs o Thol,:i tz (Director, WAP ) Poullqnen (.Asst. Director, H.C,P ) King ( Asst. to the Director, WAP ) Dutt (Chief, HA1DB) Deurill1g (r;:--og" Coord~, novani {Di.rector) PBP) van de:' Ta'c~ (PAS) Bowro~ (P&B)

fui tter ( Res o Rep J WAFGA) Pearce (WAFUG) v.yss (Chi.ef, WAf'l.·lA ) el Haaroufi (Res. Rep , WAFUV

l)., 1975

Dear • rteys

t ob d • £ lloldna D'. :

1. ir''YJ, 197$, &aa £ :U.COJ

2. L ter _, dated ell.

CCI

~ Re:1.t.t-er/McGibbon

Record Removal Notice The World B•nk Group

Archives & Records Management

File Title Barcode No. Volta Expansion Project/ Volta Power II - Ghana - Loan 0618 - P000836 - Correspondence - Volume 2

Document Date

24 November, 1976

Correspondents / Participants

Document Type

Letter

S. Y. M. Quansah, Chief Accountant to Morgan Guaranty Trust Company

Subject I Title Payment on Account ( 2 Copies )

Exception(s)

Financial Information iv Additional Comments

1607976

The item(s) identified above has/have been removed in accordance with The World Bank Policy on Access to Information or other disclosure policies of the World Bank Group.

Withdrawn by

Sherrine M. Thompson

Date

August 04, 2011

Archives 01 (March 2017)

Record Removal Notice The World a.nk Group

Archives & Records Management

File Title Barcode No. Volta Expansion Project/ Volta Power II - Ghana - Loan 0618 - P000836 - Correspondence - Volume 2 1607976

Document Date

10 June, 1979

Correspondents / Participants To: Mr Devbrat Dutt, CPI, WA

From: T.M.C. Asser, Legal

Subject / Title

Document Type

Memorandum

GHANA - Loans No. 310 - GH - Covenants applying to future power projects

Exception(s) Attorney-Client Privilege

Additional Comments

The item(s) identified above has/have been removed in accordance with The World Bank Policy on Access to Information or other disclosure policies of the World Bank Group.

Withdrawn by

Sherrine M. Thompson

Date

August 04, 2011

Archives 01 (March 2017)

June lO, 1975

GHANA - Quarterly Report

Dear Mr. Quartey:

Thank you tor your letter of May 9, 197$ enclosing a copy

of the Authority•s Quart.orly Report tor the period ended December 31, 1974.

'We have reviewed your document and have no c nts this time.

Since.rely yours,

~Li Chief, Public Utilities Projects Itlvision

Western Africa .l\lgional Office

Mr. E. L. Quartey Chief Executive Vol.ta Rlver Authority P. O. Box 77 Accra, Ghana

I

SAlber-Glja~tten: cs

Control U GHA~- 5- 6

June 9, 1915

Robmot G. Tllr.m.ell a1nim Ltd.

300 Lakaaide !k'i ft _.....,....N. caJ.1fOfflU, 94612 ..

Mr.

4'*DOIIJle(IRe rece t, ot 7(J'f1r lett.er to • urlclc, 197S, wit.h attacbflSn.te. r our tat! baa

and die ca. 111 tb the Gcmn1J1111Dt Ghana and Vol :ver thorit.T the pl."Op08&l cont.rdned t.herein, • will irltom you or t.he Bamt1 a op1.m.on.

cc f Kr. urick Hr. Dutt

TMCAsser acrm

Tows ainca 13'.,

TO:

FROM:

SUBJECT:

G-/t~ G- 6/K I NTERNATIONAL DEVELOPMENT I INTERNATI ONAL BANK FOR I IN TERNATIONAL FINANCE

ASSOCIATION RECONSTRUCTI ON AND DEVELO PMEN T CORPORATION · A~P K v-. 1-'{,w,.c.,

Files/'6FFICE MEMORAND~~. June 9, 1975 ~~.Jr-~

S. Alber-Gla~n (WAPPB)

GHANA - Power - Volta River Authority - Loan 618-GH Quarterly Progress Report as of Dec. 1974.

Subject to the auditor's review, VRA reports an increase of 26 • .5% in its net income during 1974, thus yielding a return on equity of 6.4%. It should be noted that VRA's VALCO revenues are calculated on the basis of a power rate of 2.7.5 Mills/Kwh i.e. excluding the Interim Increase of 0.375 Mills/Kwh. Assuming VRA and VALCO agree eventually to at least this interim increase, VRA will have achieved a return of 7. 76%, practi­cally meeting the 8% requirement of Loan 618-GH.

VRA.'s increased net income resulted also in a stronger current position of 106 as against lo2 in the previous year. As in 1973 VRA. paid¢ 2.0 million dividends, which is twice what was forecast during appraisal.

cc. Messrs. Dutt (Chief, WAlDB) Munthali (WAlDB) Reitter (Res. Rep. WAFUHA) Thiam (WA PPB) Bates (WA PPB)

SAlber-Glanstaetten:cs

I TO:

FROM :

SUBJECT:

u

l )

INTERNATI ON AL 0E v ELOP•.1r,n I 1rnf.Hi,ATIONA1 £J ANI~ r oR ASSO C: IATI ON RECONST TIUC TION AND DfVE:.l.:OPMENT I I NTERNAl I ONAL FI NANCE ,d_ -r- / ;_ '/)

COIWO RA TI or, ~"!t-~ GJ-t~ _ t.,-D>A-f Hy~ r<-6:i

OFFICE MEMORANDU~G-l~ _ 1~ trt Mr. R. A. RibL (Chief, WAPPB)

,( ," <'; ·-

s. Alber-Glanstaetten and R/ Bates (WAPPB) . v\..._,. L . GHANA - Power - Vol ta River Authority (VRA)

V ALCO I s Fifth Potline E:xpansion

DATE: June 9, 1975

1. VALCO is requesting,in its letter of Hay 30, 1975, IBRD to consent to four draft docu.rnents related to their plrumed fifth pot.line expansion. While V ALCO is specifictlly requesting at this bme our consent to the a:nend-nents of (i) tho Subsc:rip,.;ion Agree.."!lcnt, (ii) the Long-Tenn Tolling Contract, (iii) the VALCO Current Account Trust,and (iv) the EXIl1 VALCO Lozn Agreement, it also included in the packaee of documents rui

amendrner1t to the Poucr Contract directed essentitlly . at (i) VRA I s obligations to supply an additional 45 l·i;·l, and (ii) related cont!'act rat3s. (The amendment does not deal \lith the pricin g of the 370 Kvl , but leaYes the settlement to further discussions on the basis of the Shawmont Dtudy.)

2. As V ALCO does not r equest at this time IR.'llD to consent to the amendment to the Po-:mr Contract, no reaction frcm us on this docu.,ient is required at this time. Hr. Asser is presently studyi..~g the cross-relation­ship of the Power Contract with the above four documents, but has expressed doubt that thGy can be approved separately, as the Haster Agreer.lent provides that all agreements related thereto have to be viewed as one ccr:iplex li..'1.ked together.

3. What is of interest to us is the nature and the content of the proposed a."!lendment to the Power Contrar;t. F'ro.11 ,~hat ue know, tirnre has been no def:i.ni tive agrecnent between VRA and V ALCO on VRA' s new oblir;ations to supply the 45 MW and the related contract rates. Therefore, the document before us would appear to be actually VALCO' s first bargaining position (Mr. Reitter may be able to shed more light on this assumption and indicate whether in fact some of the provisions have been substantially agre.ed between VRA and VPLCO during recent months).

4. Briefly, the amendment contains the main following pro7isions:

(i) VRA is obligated to increase to V ALCO, as of 1977, f:i..nn power delivery by 30 MW fran presently 370 MW to 400 MW;

(ii) VRA is obligated to provide V ALCO, as of ·197?, with 1.5 MW of interruptible power;

(iii) VALCO has the option to increase its take of firm power frcm 400 H\v to' 415 l·frl either (a) when VRA I s generating capacity has reached a certain level, or (b) by pre~npting new· local industrial consumers in their proposed take of finn power; .

(iv) VRA may curtail, after 1981, the power delivery to VALCO by not more than .30 l~ in the event that the ccrmnissioning

\.

!

0

--~ ---- - -

Mr. R. A. Ribi - 2 - June 9, 1975

of Kpong is delayed. Any delay of Kpong would constitute an event of force majeure, i.e., power should be delivered in the same proportion as during the previous twelve .~ . ,,· months among all VRA customers.

(v) The power ·rate for the addition~ 30 11W would be 5 .00 mills/KWh to be adjusted by the actual cost of Kpong, but subject to a ceiling of 8. 75 mills/KWh;

(vi) The power rate for the 15 M,1 interruptible power would be 6 .00 mills/KWh, also to be adjusted by the actual cost of Kpong and subject to a ceiling of 9. 75 mills/KWh.

5. The a111endment favors V ALC(), which should not be surprising if this is their initial bargaining position. Essentially, VALCO is being granted so."lle further options and in ef feet is not giving away anything except possibly a contract rate which is higher for the 15 interruptible MW than the 30 l·~l of finil pm-H:r ( the rationale for this is unclear to us), while VRA is obligated to r,1ake available 30 lf:1 durin6 a period of pote.--itial power shortages (see Acres' load foracast) and for contract pric8S which reflect outdated cost and capacity - data of Kpong only to be adjusted upon Kponc;' s ca.'!lmissioning in 1981. How the ceilings for the envisaged adjust­ments of 8.75 and 9.75 mills/KWh (see ite.-ns v and vi) have been calculated is not clear to us.

6. . Prior to signing the proposed new provisions of the Power Contract, the Ghana Goverrrnent should consider:

(i) the defcnnent of VRA's obligation to provide .VALCO with 30 }j-1 finn power until Kpong is cornmis sioned;

(ii) the adjustment of the talce or pay clause to renect V ALCD I s increased powertake; .,

(iii) the payme~t of a higher oontr_act rate by VllliCO, if a local - industry has to be preempted;

(iv) the replacement of the outdated cost and capacity data related to the Kpong project by Acres' new data and thus the amendment to the contract rates. This is likely to entail a. revision of the ceilings of paragraph 5.

7. Finally, given the very special nature of the Power Contract, we would reccrmnend to co~sider the appointment of Mr. Swidler (see Mr. Rovani's memo of April 30, 1975 ) as a high-level consultant to the Ghana Government in their forthcoming negotiations on the 45 MW and, of course more importantly, on the 370 HW covered in the Shawmont study.

SAlber-Glanstaetten/RBates::fm cc: Messrs. futt (UrUDB), Hunthali (WAlDB), Asser (Legal)

Reitter (Res . Rep·'. WAFG.HA) l.

Thiam (WAPPB)

11 b-k c,. '-'-.c-- _ / c .t::v-- ? I t"'

A G,[._t__-. ... ~ . /c.c.._- I::, I~

Juna 6, 1975

.cJ. 1 .., convGrsation thio morning I sau ¥.r. Nurick. c l\S&uwed thnt the request for ccnaent was

9-"S ,~ Le b.ud ai~ed tho previous conncnt . lle . . :.:~ prm.lcn.t cr ... nscnt letter and the lotter of

1 4 .. ~J by sctiebody in youl· Rciion.

, t d the second letter.

fURM"' . 590 , 1

._J

.,. r~

-

. ~Ale..~

B D AN· iDA - SUPERVISION SU MARY This summary is the initial summary

part of a mission report

a semi-annual update

the completion summary

Project Code: , Loan , Credit No.: L/C Amount ($xx.xm):

~0LTA VER POWER II 3 _02 i 618-GH $6.0 milli

....

Borrower /Beneficiary Board Date: Signing Date: Effective Date:

VOLTA RIVER AUTHORITY 5/8/69 6/23/69 10 1 ~9 O·y. Code No.: Loan Officer:

ti "' 1 "' /40 Munthali

This Summary Last Summary

y, • u 'ri.Jrat ng B ill 3 , a T. Technical, P • Political; 0 · Other (Explain in Section 5)

I I I l I most reel.ht SVP review? Y. Yes; -No rn.J

Total

rojc "-t Loan/Credit Project

Co l",Jlet, Closing Cost

.. iii /V ( o./.Jay/Yr.) ($xx.xm)

1 !:11 72.., "2 l ~11 73 1~ .lJ. 12 1li i 2 I .)1, 13 16 -2 1 .•• 74 i2 I 11. 73 _KJ_R._

l\o, uf Stat• vn Mission No. of Days in Country

3 10-14 11

of which:

Foreign Local

Currency

($xx.xm)

12 .2 1lt ·~ 14 ·.-

Currency

($xx.xm)

2 .2 2 .o 2 .4

Return to HO

(Mo./Day/Yr.)

03 I 01. 75 07 I 01. 74

Cumulative Disbursements

through most recent

Quarter ended ( / /

($xx.xm)

Final Report Date

(Mo./Day/Yr.l

03 ,20 ,2S ( o 1· 07 ,08 ,74 B'l'O)·

R~co,P-nended interval End of period covered by latest

b tween rr ,sions (Months) N/A progress report (Mo./Day/Yr.)09 1 30. 74 1?rt, ~S Co nb,necl full/B·T-0; C = Comoletion; A= Appraisal; 0 - Other (explain below) frea raiaal

a,ri "o h r" in Section 2 and clarify, if necessary, data in Sections 3 and 4)

a sentiilly- a p apprai al or the

,·us. TREND, AND MAJoR H

lnltlal1: Date:

8

J

1 •

2.

6.

8 ..

'J

~. IV•

11.

12.

'l '' .) . 14.

Completion Report

Borrcwer B ficiary

Loan Amount

Date Loan Signed

Effective Date

Clc,~ing Date

Period of Grace

Tt .... - of Loan

C~i::l!lent Charge

Amortization

Exchange Rate

Appraisal Report Jfo. and Date

Co-financing Partners

Fiscal Year

Volta River Authority (VBA)

Government of Ghana

$6.o million

June 23, 1969

October 1., 1969

December 1973

10 yeara

25 years

6-1/2 percent p.a.

3/4 percent p.a.

June 15, 1979 - June 15, 1994

US$1 - 1.15¢

PU-8a - Mq 8, 1969

CIDA-Can. 7 .4 irll.lion US AID US$0.7 million

Calendar year

16. Project Description

{i)

(1 ... )

completion of the .Akosombo (Volta River) power station b7 the addition of the fifth and sixth 147 MW generating 'UllitaJ

e.xpanaion or 165 KV subatations at Akosombo., Vol ta (Tema)., and the VAWO smelt.er to meet increased ael ter demand;

expansion of 165 KV substation facilities at Tama., Sekondi­'.:'akoradi, and Kumasi to serve EOG;

(iv) purchase of specialized vehicles required in connection with the transport of equipment, tool and material.a tor mainten­ance of the 165 KV transmission system;

(v) miscellaneous minor works for routine improv&ll8Dts to generat­ing and transmiosio:n facilities, housing., district stores., etc.;

(vi) consulting services associated with the completion of the 1:.kosombo power station and expansion of substation facilities; and

(vii) consult:i.ng services to reviw future expansion plans, to re­organize tbe accountancy' depart.cent, and. to improve operat.iona.

J

•••• /2

Juat.."\.fication and Objectives of Loan 618-GH

~7f; i'he project's justification was based in VRA•a obligations unde:r the Power Contract to meet the increasing demand from the amelt,er operated by the Volta Aluminutl CompBD7. The tvo other planned items, outside the Bank project, were· the transmission line to Togo and Daho1i1.cr-.f., to be financed by CIDA, and the third double oircmit line to th~ smelter which Bank staff considered not to be £ully justified .md wh:.ch is being f'inanced~by VRA- from· its-own -resou~ea.

18. In thir:i second loan to VHA--in addition to providing foreign ex-.han:;e--the Bank sought to achieve several iruprovements related to orga.Irl.i5ational structure., accounting procedures and staffing. Further­r:i.r t'E, eince the Bank considered it essential. to separate as far as µol:ls:lhle VRA•s power and non-power activities, it was agreed that (-':.) P,L"tf '£' re•,enues should not be uarni to finance non-power activities; C tJ '- "tiA should not ext8Dd its non-power activities at the risk of :• · .i.ng efficient conduct of its power operations; and (iii) VRA' s un-?ouer activities should be accounted for separately.

:rocu.rement and Project Execution

• 9~ All the :dank financed st..,pply and installation contracts tDr 1·,c Akcsombo Expansion Project were awarded in 1970 according to the

:1,""rk• s Guidelines on Procurement.. Annex 1 shows the fil'JIS to which "./H· .. ~;wa.rded the different contracts as well as the approximate con­tro.ct amounts. Installation of Akoao.obo Units 5 and 6 started by the enci ,;;f 1970 with about a six month· delay, and was completed b;r the end of i9?2 as forecast in t,he Appraisal Report; the 'U!li. ts w ·!N commissioned i.n August and November 1972 respectively, i.e. with a delay of about foui• months compared to the preliminary schedule of the consultant. In the mea..."l.ti.me the installation of VALCO•s 4th pot.line, the main user of the B.ddi tional energy which the facilities included in the project can r,·~~o<i°J.ce, began in mid-1970 and ws.s substantially complete by the end o.f 1971 e

2·0, Ex.cep t fa::: the Akosom.bo a.nd Tema substations (item ii, para. 16 ), ,'hich were carried out and completed in parallel With the Akoaombo B::-1Jansion Project, ,the contracts for the yab tation Expansi(s Program (item :Ll.i, para. 16) were awarded late in 1971 tw.d in 1972 see .i:11.1-iax 1). The related works were started in 1972 for all substations., cxce-pt in Kumasi where works a tarted in 1973. 'By the end of 1973 all ec;u.ipment wa:i delivered., except for SCll:le minor ite:u suoh as panels, rela;.rs and control equipment financed by US AID; as a result, installa­tion of the substations was susponded for the first half of 1974. 'l'hese ~.;rorks were completed by the end of 1974 with a long delay of .:hoilt 20 months. However, this delay had no major advene effect on opera. tio11 of the system. As o:f March 1975 only the repair ot one t,::t"aw;fo.rmer financed by CIDA., and uhich was f'oumi to be def'eotive after delivery-, ramained to be completed.

Bank did not make any disbursement for item (iv) ecialized vehicles tools and :materials for maintan­

of the 1 KV transmission sy-stem see Annex 3; to what t the equipment originally- planned (foreign exchange oaaponent

~ ~ vOO) was actually purchased is not clear from VRA•s l .t~t. - -

VRA undertook miscellaneous mino works for routine improve-1.S to generation and transmis ion facilities (itan v, para. 16)

o ~ :1 maller scale than initially planned without any adverse effect 01Jer ti.ona; VRA•s engineering staff was unable to give a precise on for th.is reduction~

Inc. (US) carried out the ___ l_,.;. 1 se cos associated with the completion of the Akosombo

... ion and expansion of ub tation facilities (item vi, ,6). In 1973 they released a final report dated December 1972 Akosombo Expansion 'Works.

In July 1970 VRA also appointed Kaiser Engineers Intemat:ional as consultants to undertake the study of altemative sources of

, ture electrici -c,,r generatio11 which should be used once the 1'ull capa­t .. of the expanded Akosombo plant is committed. This stu~ was

01npleued in .August 1971, and fo ed the basis on which ill 1974-75 a -Shawini cm of Canada carried out the f'ea ibilit7 study' ot the

ydro poW"er plant.

'l'h ogo-Dah jl line, the financing of which did not involve .Bsnk (se para. 17 was co plated and energized in December 1972

w.1 th about 18 mon+ t delay. This delay was not incurred during the nat1: 1ction time; it was due to negotiations between VRA, CEB and

C1DA la ting longer than expected before start of construction. The c ntract of the third double c .rcuit transmiesi line fr .Alcoso bo t.o ·1.' , , for which financing the Bank was not involved either., was aw~ on_y in July 1973 to Sade (Italy'); the construction of tJ is line started in :P-ebruary 1974 with a contractual lead time of 20 • ont ... 1s.

The estimated total cost of the project as appraised was T• "''14.4 mil:ion. The final total cost of the project, as sho in 1., ... ex . .::.s about US$17 .O million (US$14. 6 million in foreign exchange arid US$2. 4 million in local currency-), which represents an increase of 17 .. 9 p rc8'Jlt over the appraisal estimate. This increase is mainly d11e (i) to the 1.nflation associated with the above delays, and (ii) +.,o several currency cha."lgea which occurred ng the, u of the project--the US$ was devalued tvioe (in Dec ber 1971 and February '973) wh · the ¢ was once devalued and once revaJ; ed 1n the aame

riod, which re lted in a 13 percent net rev luation ot the Cedi c mpored to the US dollar • beeides, the parities of several other ~ rrenciew used for the project were changed during this time.

.... /4

27. The act.ual disbursements from the Loan as compared to those est:i.matea at appraisal time were as follows:

Actual Estimation Millions of US$ Equivalent

1969 0.217 1970 0.047 2. 145 1971 2.882 2.4.35 1972 2.052 1.20.3 1973 1.019

us .000 US$6.000

id the actual ounts isbu.rsed, by category, coapared to or1. inal allocation inc Juded :1n the Loan Agreement.

28. RA' s staff ... s operating and aintaining the .Akosombo plant and th~ vransmisa~on lines ef-iciently and in accordance with high

tandarcls, which is reflected in a satisfactory availability of the required. powt:.:r supply. A jor interruption of about one day occured m 1973 but was due to accidental short circuit by a tranais8ion

· ~ ~ontractor.

~eject Financing

~9. Consequent to the currency realignments referred to in para. 26, the Bank Loan plus the undisbursed portion of Loan 310-0H fell about us ·3.50,ooo short of meeting t.he foreign exchange cost o! Bank financed i •...e:111 i.e. a-apply and inBtall .tion of turbines, supply and inatallation of ubst~ t,ion equipru :.ut and con lting services for future expansion -and organi"'ation (see also Annex 2). In 1972 VRA did request supple­ment ry financing but on the basis of VRA•a reaaonable liquidit;r out­-ook, the Bank did not consider the matter any further.

)0. CIDA financed the supply and installation of the generators and substation equip ent, while US AID financed essentially the

t.ion superv-lsion of the Vol ta expansion project. Thus towards ated final foreign exchange costs of US 14. 6 aillion (see . th· Bank contrib-.ited 42 percent, CIDA 51 percent, US AID

5 p r cmd. VRA 2 perce11t. All of the local costs of US • 4 million wr. rn financed by VRA and a Ghana Gove ent loan. The es t d coat

of US 2.6 million was financed b,- CIDA (U 2.0 aillim) and ,ooo). 1

o. iJv, o 1er t o investments mentioned in para. i7, only the o.:;o- icllomey line wa. canpleted as ~ March 1975. The foreign exchange

·: ,st o.t this line (US$1. 75 million) was !:inanced b;y CIDA, while the ;_ocal coete were financed .trom VRA• s intemal 011ah generation and a

nane Gov mment lorin. Th xeoution of the third double oircuit line ~m I h l up unt.:11 i913 b oau e the acted ItaliAn t:1nanoing did not. mnteri 1 zc ( is6e tileo para. 2$).

•• -../5

Fk~ancial Performance

32.. .Although VRA.•s power revenues arew during 1969-1973 by about 13.5 percent p.a., i.e. tour percentage points more than estimated during appraisal, increases 1n operating expenses and interest practi­cally offset these gains resulting in only a slightly higher (9 per­cent) cumulative net income over the period. The increase in revenues is mainlY,. s:rue to higher energy sales to VALCO, the net deTaluation or the Cedi 2/ and power rate increases to ECG and the mines. The in.crease in operating expenses was tiainly due to increased staf't' costs and dsbt service. VRA essentially performed on all major indicators as forecast (see Annex 4). VRA did meet throughout the period its in~e1~~~ revmiue requirement, i.e. coverage of operating expenses, cleprl'i ci:.- tion and interest. ( The first test year of the 8 percent .;.•,;t,u·r- c7.l equit,y covenant is 1974. Whether or not VRA w1ll meet this tt;,:;t i.o , i.1.•gely dependent on the o·v.tcome of the current discussion bti.t.h , ::.o on an increase in the Power Rate, which, if agreed, would tts: .... .,.,_-oactiva to 1973. On ·::.he bacis of the present tariff's and the n,•o,·i.aional accounts it would appear that the return would be about ~ parcon~.) VBA also practically matched the appraisal forecast by payiz1g dividends to the Government, in 1972 and 1973.

~ :i, Event·1.D.lly, all main senior engineering and accounting staff f',3:.tions, identified during Barut appraisal as vacant, were filled eus0:1utialJ.y from VRA•s ow.n ranks. VRA.ts present Chief Executive 7.•anain~ Vf.A' s dr:1.ving force but is well assisted by the Directors o.f' .i.Fit:.artce and Power Operations. The Government is considering shifting thf) powers to hire and fire from VRA•s Chief Executive to VBA•s Bou:rd, but so far has taken no definite action. Informally, the Bank "uggest.ed to the Government that if it wants to change ar2Y'thing at c..L'.... it should ll111i t the Board• s power to hire and fire to senior staff m::.ly.. At present, the appointment of VRA• s Chief ExecutiTe is subject to th.0 approval of th.e Ban.le (see Seotion 5-10b of the Loan Agreement). Il1 d.D.Y next lending operation the Bank might consider ohanging this "&ppro'la.s. 11 clause into a "consultation" clause in recognition of the :lillpract.icability of actually vetoing a decision of a sovereign Govern­ment.

~rge.ni.:r s ticn and Staffing

Jh. 'l'he Bank stipulated that VRA carry out a full scale review of -t:3 operations and organizational structure (see Section 5-1Cb of the Loa..;. Agreement). In 1969 VRA engaged Ontario Hydro (Cana.cl.a.) for this review. The consultants• main recommendation included (i) the ooordi­!"!.ation of VF.A• a power divisicn with ECO•s either through a aerier or a Gov,.8:1:'nmsnt Board; (11) tho upmrading. 0£ VRAI s engineering ata!t

2/ As YAWO pays in US Dollars, s. devaluation of the Cedi increases t.h.c V1UJJO revanuee expressed in Cedis correspondingly'

o • u/6

;.:-i-tn consult&"'lts• assistance; (iii) the establishment of a financial planning and analysis group and (iv) VRA•s disengagement from resettle­ment activities. Despite the Bank's insistance on seeing Ontario F..yd.l'-o's report, VRA managed to withhold it for about one and a half years on the basis that VRA.ts Boa.rd had not yet "adopted" the Report. VRA•s secretive behavior was apparently based on its fear not to add f'uel to a Government enquiry into its affair undertaken at that ti.Ile. P:reBU.:.'"lB.bly as so much time had passed since the consultants' findings and as the Bank covenant did not specify when VRA would have to talce ::.:.1y desirable measures, the Bank did not press this point further. The only measure which was finally taken by the Government was to relieve VRA of its resettlement responsibilities in 1972.

3Se With the exception of the clerical. category., VRA•s overall s·::.a.ffing remained at the 1969 level. The Bank• s concern about over­"ltG.f.fir .. g at the clerical levels may be considered typical for a public 1.1.'..,il::>r project appraised 1n the late sixties. In fact., it is exceed­jr.g.,y difficult to assess the productivity of low level staff and also to fend off Govermuent pressures without at least very specific yearly ta.:·gcts. In this case no goals were ever defined and therefore it shouL:l. x~ot be a surprise to see a 60 percent increase since 1969 in these ~ositionsa

Acco;mting and Audit

:-~'. Ti:.e Bank identified during appraisal internal control weaknesses 'Demi-: r:.0cnciliations., debt balances, accounts payable., stores) and raisa1locationa of costs common to power and non-power operations. Based 011 t.71e auditor•s separate opinion to the 1973 acco'Ullts, VRA's account­ing and internal control standards are now satisfactory.

37.. vmu s accounts continue to be audited by Coopers & Lybrand (Gha...'1a) which is satisfactory.

Ar..nex ~: List of ?roject•s Contractors Project's Final Total Costs An:::ex 2:

i.nnex 3 z .Annex 4~

Compariaon by Category of Original and Actual Disbursements VRA--Comparison of Actual and Forecast Financial Indicators

BM'Ih.iam/SAlber-Glanataet ten: lam

cc: Messrs. Wright (Director, WA1DR) Dutt (Chief, WA1DB) Tha.lwitz (Director, WAP) i>o"t:.liquen (Asst. Director, WAP) Rowe (Asst. Director, W.AP) King (Asat. to the Director) Ribi (Chief, WAPPB) Denning (Prog. Coordinator WANVP) Rovani (Director., PBP)--2

Reitter (Res.Rep., WAPUA) Pearce (WAfflG) Wyss (Chief, WAFWA) El Mae.roufi (Bes.Rep., WAPUV) Asser (Lawyer) Meyer (Controller•s) Elliott (Oontroller•s) van der Tak (PAS)--3 Bowron (P&B)

Sources of F:ina.ic~L

IBFJJ IBRD

IBRD CIDA

CIDA

IBRD

IBRD

;.,,: '"' 1i :; .-. Pro J" c '; ~ .-.; ~, , • ": ,, J., rs .... or: ... -,..,..... -::.----··· ~., ""~ .. =,,,. .. - •• · ,., _ __, • .._ .,.;i,... ........ • "

Contracts

XA~4: XA-6:

XA-JM: XA-5:

Supply of turbines and govern.om Supply of intake gate hoist,s and· tra:::..h rackl:l Installation of turbines and governors Supply of generators and main transformers

XA-JEa Installation of generators and main transformers

XS-1: Supply of Volta and smelter substation equipment

XS-21 Installation of Volta and smelter substation equipment-

Hitachi Ltd. (Japan) Newt-0n ChaJnbers Engineering Ltd. (UK) Sadelmi (Italy) General Electrjc Co. {Canada) Canadian International Comstock Co. Ltd. (Canada) GIE-Sadelmi (Italy)

GIE-Sadelm:1. (Italy)

2. Substation Expansion Program

IBRD SS-1t

IBRD SS-2t.

US AID SS-3t

IBHD IS-1 t

CIDA TS-1t

Supply of 161 KV oil circuit breakers

Supply of instr-ament transformers

Supply of control board and relay equipment Installation of substation equipment

Supply of power transformers and lightening arresters

General. Elec·tric Co (USA) Ind:l.an Consortium for Power (India) Westinghouse (USA)

Sadelmi-Cogepi (Italy) Westinghouse (Canada)

Approximate Amount (in US$0001 a)___ ~

2,311 130

2,506 4,832

1,591

6.30

S49

272

21

71

1,317

1,341

1. 5th and 6th uni ts at Akcso!l'bo

2. Substation expan~:ton

3. Consul ting services for .Ako ombo-Volta (Te111a)

CcDDul.ti.ng services for e;;.;pa:i.~ion review and ~gement

5. ltiscellaneous i te!ll8 **

Total

Pr,, i -3•'": tJ s Fi.Jal To., tl Coe';"' ---, .......... .._ .... -=-,.~~-..-"111!'t,:nc,,.,,,.,,.. -.-·--·- .... ,. .... ,. ... ,.. ........ _.

Tc) tal C1 .. r·~··ent J!;.,1 1·1J.1v.h.1 in U;:l.~000 1 s ~--·--·- ... .,.,.,,--.,..._..,,.., ··-:.,~t,,,'..,_,_;a,~ ..... -------Q£-i...

& ... , ------- Foreign --- ··=-=--AEpraisal Actual Variation

7,965

2,76o

650

355

4~ 12,180

9,834 + 23e4 o/o

3,784*+ 37.1

672 + .3 • .3

168 - 52.6

69 - 80.2

14,547 + 19.4 o/o

1,265

24S

125

145

420

~2~

Loca] -· ·---~, ·--Actual Varla.t.ion

1,537 + 21.s o/o

595* +142.8

130 + 4

90 - 37.9

6o - 85.7 -~412 !--2~~-0/ 2_

~~-

---··--- ~ 0

--- Total ----------~PEr~el Actu.:-·1 Variation

9,230 11,371 + 23.1 o/o

3,005 4,378* + 45

775

500 258 - 48.4

870 111,9 - 82.8

14,3fk2 (@:._.~7.:! of.2

'* A pending claim by Sadelmi for US$176,o66.17 (foreign currency of US$130.,848.78 and a local component of US$45.,217.39) has been included; its payment by VRA is unlikely

•ll Actual costs exclude expenditures for maintenance vehicles and VBA overheads, both of which are unknmm

I\)

A. Turbines, goveruorn, auxiliary equipment and civil works connected m. th the pa-wer plant

B. Substation equlpment including sv-ltchgears, transfonners auxiliary equipment, a transmission line connecting the Volta and smelter substations, and related civil_ works

C. Construction and service vehicles

D. Consul.ting and training services

E. Miscella."leous works

F. Unallocated

Total

Origi 3.l Allocat.ion ___ in _ _.!!§$ ___ _

3,100,00'.)

1,550,000

150,000

350,000

300,000

550,000

.§..,_ooo , ooo

Actual Amount, lh.uburaed Under the Loan ·----4,622,6o.5.oh

,,,,9,656.9()

168,483.09

69,254.97

6,000, 00<?.:.QQ.

Q,2),;lParison of Actual and Foreca~ Finalwial Ind.1.r ~

1962_ .l27Q. 19JJ. 1972 1211 Return of ~uiS[ (percent)

Appraisal Forecast 0.9 2.3 3.9 5 0 1 6.5 Actual 0.9 2.1 J.2 4.8 5.5

~~_!!.c~Q.._~~e (T~es Covered) Appraisal Forecast 1.2 1.3. 1.4 1.7 Actual 1.2 1.2 1.6 1.4 0.9

Current Ratio Appraisal Forecast 0.9 0.9 0.9 1.0 ,.o Actual 2.4 3.2 1.4 o.B 1.2

Debt/Equi~ Ratio 55/45 55/45 55/45 55/45 Appraisal Forecast 55/45

Actual 54/46 53/47 57/43 57/43 52/48

Net Income (¢ million) Appraisal Forecast o.5 1.4 2.5 J.4 4.5 Actual 1.s 1.8 2.2 3.6 4.4

Dividends Paid(¢ million) Appraisal Forecast 1.0 2.5 i Actual 1.0 2.0

~ .i:-

form No. 27 (3-70)

/ 1 ,

INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION

TO:

COUNTRY:

TEXT: Cable No.:

AUTHORIZED BY:

COOPERS AND LYBRAND

BOX 2533 ACCRA

GHANA

XH.

OU TGOING WIRE

DATE:

CLASS OF SERVICE:

JUNE 3,

LT I (2725)

1975

~~

REVOLTAS CABLE MAY 30 .AMOUNTS OUTSTANDING EXPRESSED IN USDOLLAR.S AT

DECEMBER 31, 1974 AS FOLLOWS STOP LOAN 310 GR 35,669,000 STOP LOAN 618 GR

6,000,000.00 STOP FOR DETAILS LETTER FOLLOWS

INTBAFRAD

NOT TO BE TRANSMITIED

CLEARANCES AND COPY DISTRIBUTION:

NAME David W. Gray cc: Messrs. Davies/Gray, Elliott, Davis

and Crausway

AUTHORIZED TO APPROVE> REFERENCE:

ORIGINAL (File Copy) (IMPORTANT: See Secretaries Guide for preparing form)

File: Statement Folders - 310 & 618 GR SYu/ntvh

For Use By,.¢mmunications Section

Checked for Dispatch: ---------------

J:N j i lt f~ I 1975 ((..'.. '\' ., '/Tl)\J,

•• ' 1 , ) , 1

Record Removal Notice The World Bank Group

Archives & Records Management

File Title Barcode No. Volta Expansion Project/ Volta Power TI - Ghana - Loan 0618 - P000836 - Correspondence - Volume 2

Document Date

03 June, 1975

Correspondents / Participants Mr Devbrat Dutt, CPI, WA

T.M.C. Asser, Legal

Subject/ Title

Document Type

Memorandum

1607976

GHANA - Loans No. 310 - GH - and Loan No. 618 - GH ( Volta Projects) - Valeo Fifth Potline Expansion

Exception(s) Attorney-Client Privilege

Additional Comments

The item(s) identified above has/have been removed in accordance with The World Bank Policy on Access to Information or other disclosure policies of the World Bank Group.

Withdrawn by

Sherrine M. Thompson

Date

August 04, 2011

Archives 01 (March 2017)

' f, ,,m No. 1.7

(3-70)

INTERNATIONAL DEVELOPMENT

ASSOCIATION

TO: VOLTA

ACCRA

COUNTRY: GllANA

TEXT: Cable No.:

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

OUTGOING WIRE

..

DATE:

CLASS OF

SERVICE:

. . .., Ice::\....._

Ice-''"

3 / 0 /-,/

INTERNATIONAL FINANCE

CORPORATION

JUNE 3, 1975

~~25) \

REURCAB MAY 30 WE HlWE CABLED COOPERS AND LYBRAND TODAY AS FOLLOWS QUOTE

AMOUNTS OUTSTANDING EXPRESSED IN USDOLLARS AT DECEMBER 31, .197Li- LOAN 310 GH

35,669,000 STOP LOAN 618 GR 6,000,000 STOP FOR DETAILS LETTER FOLLOWS UNQUOTE

AUlHORIZED BY:

~,AME David w. Gray

ui-1 Controller's ,,, ,...-l c:-· '- )

~ ,f1AllJRt: \.. . \.: '-..J. -- -----,

INTBAFRAD

NOT TO BE TRANSMITTED

CLEARANCES AND COPY D1STRIBU1l0N:

cc: Messrs. Davies/Gray, Elliott, Davis and Crausway

File: Loan Statement Folders - 310 &618 GE SYu/ntvh

<SIGNATURE OF INDIVIDUAL AUTHORIZED TO APPROVE) ~1 11 ~I flCE:

Fo, Use By Communicarions Section

ORIGINAL (File Copy) (IMP{)OTAt..lT. c-- C---- - .. --!-- ,.._ • . t

. } L---

l ~ ·'

I

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u->t ~c,._ • 0 °'-- t..11 ~A.' ~~ {;-~ Distribution:

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INCOMilJG u1 ~ • ____ ......:.:.;;.;::.;::;;;;_

1975 KAY 31 A~i 10: 44

Conti:,. Mr. Davies ..-­Co~tr. Mr. Casson

ZCZC 2:43423 RCOO S PDul464 ?.i•;L3605 -...=YC9999 n JB23 7 2rff544f ·o>(s\45 YlUl

6 CAC703

A461 2

U!i v,'T i-iL GHAA 037

ACCRA 37 30 1606

May 30, 1975

LT

I NTSAF~AD DI SBURSEM~NTS DIVI SI ON

I i3RD

WASH I NG TC iJDC

VER Y URGENT G~A TEFUL CONFIR M 3HLANCE OUTSTA ND I NG

Confroller'e Accounting Divl:;lon

RECEl'JF.D

JUN2 1975 I , I

HMO I I o·i~~ ' JDE- j~j HK I l JL1_.M v:=1 IC i"il I ~-

1

MMLI I Jl\l_D_ I ---.01 t/ I I · -

I !- I -I I I ---

Files I I I

0 N LO A l'-i S A 3 AT 3 l ST D c CC: I-'13 ER 1 9 7 L; DI RE C T TO O U R AUD I TO ~ S

COOP ~RS AND LYERA~D BOX 2533 ACC~A GhANA WIT H

COPY TO VOLT A RIV ER AUTHOR ITi

VOLT A ACCRJ'.I.

COLL LT 3 1ST 1974 2533 ,·

.... , .--"'\": ... ,,. ____ "'":""~..,..---.~· -I •

~ ,., . ' .

i I • .'- 'f •

::

• • J .

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,· . I

Record Removal Notice The World 8ank Group

Archives & Records Management

File Title Barcode No. Volta Expansion Project/ Volta Power II - Ghana - Loan 0618 - P000836 - Correspondence - Volume 2

Document Date

30 May, 1975

Correspondents / Participants Lester Nurick, Esq.

Document Type

Memorandum

Associtate General Counsel International Bank for Reconstruction & Development

Subject I Title Valeo Fifth Potline Expansion

Exception(s) Attorney-Client Privilege

Additional Comments

1607976

The item(s) identified above has/have been removed in accordance with The World Bank Policy on Access to Information or other disclosure policies of the World Bank Group.

Withdrawn by

Sherrine M. Thompson

Date

August 04, 2011

Archives 01 (March 2017)

(

(

,J

. ·\ •'

/;,,~ ... - I .

Contrcllcr's A .

0. ,() I () )'; ~ 7 7. ccou11t1ng 1v1s1011

Cabl"S VOL TA, ACCRA

? Phone 6-4 9" 1 Our Ref. ~) \)(J / :)..J ~ ' RECEIVttrCRI\, G: i r J,..

JUN6 19i5 Your Ref. Dat1; 29th }:!p_y

1 hi~1D 1---1 uv~G ( :;-

1975~

Inter.national Bank for Reconst and Development,

1818 II Stroet" Wa.shington De Co 20!~.33, U .s.A. -----Deer S:trs,

Ju~ 1 · J~ I f K I - -· ~tit/?n1 r-11cr·1 I ---MML I - . I JIViD I --5 YI / I I

=1=1=1= t1 I I I L ((,n

Files .1 J I J cf { -, C (_

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Yle shnll be grateful if ycr,.1 dll issue a /_ r- (L (- r ,, · < statement on the ste.tus o our loan b~l;:;.nce ao l:'.t 31 st Dec.e-..nber, 1 974, . ending thi5 direc t;l,.y to cur r7 1 ' " L" ,, , t- </ ~ , ,

auditors, Coopera & Iifbranu., Ch9.rtered hccountrt11ts, Ii P.O. Box 2533, Sws.nmill, Liberty Ave:nuo , Ar::cr.p,, Gha.n.c;i 1 (··t '' <: ' 1 with a copy to us. _

Also confirm that there a.s no change in interest rate dur1.ng the year 1974.

. . ,

- . ., . . . ~ .

c~t Coopers &'. Iubrand }£era. •

·.:...,

;., .. / .-;..# .,

'l1 I~

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Your a f' a i th fully .,

s. Y. ·M. Qtiansah CHIEF.ACCOuNT.ANT

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c;. (;/,t e,,,,..p..__ ~ (oq, .] 10

VOLTA RIVER AUT.HORITY

Cables VOLTA. ACCRA

S 1 / Phoije 4941

Our Ref. OJ/001/ / rT;. Your Ref. 0 ~

'.Phe Chief·, Public Utilities Projects Division, Western Africa Regional Office, I.B .R.D., 1818 H Street, N .1,. Washington D .C. 20433, U.S.A.

Dear Sir,

P 0 . BOX M77.

ACCRA . GHANA

Date. May 9, 1975.

QUARTERLY REPORT VOLTA RIVER rTHORJ.'I'Y

_./ttc ;1}!, I forward, herewith"';' a copy of' tne Authority's Quarterly

Report for the period ended December 31, 1974.

Encl .

Yours truly,

E.L. Quartey Ctll~' aEC UTIVE

Dau Roo•l1~-~-~-q_]~!_5~ Date Aok'td

0

• ~ ps1gned _

c, I

CD

t .-•

., _ .. ~-~

.__ ...,.. . : ' ~~-

April- 15, 1975

GHANA - Quarterly BeF9rt

Dear Mr. Mensah:

Thank you for your letter of February 12, 1915 enclosing

VRA's Progress Repor.t for the Quarter Ending $:eptember 30, 1974 • . :Bbllowing the retum of my staff from mission.,. we have

reviewed the above do.cument and have no comment a.t this time.

Mr. E. A. Mensah Ag. Chief Executive Volta River Authority P. O. Box M ·77 Ac.era, Ghana.

SAlber"*~en: cs

Control No o GHAVRA- 5- 4

cc . Mr. Thiam (i.JA.PPB)

Sincerely yours,

a.i . ' RI.bi Chief, Public Utilities Projects Di.vision

Western Africa Regional Office

TO:

FROM:

SUBJECT:

INTERNATIONAL DEVELOPMENT I INTERNATIONAL BANK FOR ASSOCIATION RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE CORPORATION

OFFICE MEMORANDUM I

Mr . ll. /\.. lti.lil Chief, \i/\.J'Pll) --sk DATE: Mttrch ~O, 1_ cn 1:

S.Albe r-Glarf ·, a ten, l~e s and fl . 'l'hi a: (WA Pl~;( ' •

GHAfIA - Third Electricity Distribution Project (ECG) - Preappraisal Kpong Hydro Electric Project (VRA) - Preappraisal Collection of Complementary Information (Credit 256-GH and Loan 618-CH)

Back-to-Office and }ull Report

1. In accordance with our Terms of Reference of January 31, 1975 we arrived in Accra on February 13/J-4 and stayed for 10-14 days. Mr. P. Reitter actively participated in the mission's major meetings. On his way back to lvashington, Mr. Bates met with Mr. R. Turvey (Bank constLl tant) in London to review major economic aspects.

2. The anticipated VRA request for Bank retroactive financing of preliminary engineering and preparation of contract documents for Kpong, VHA's likely next project, did not materialize.

3. Final costs on both Loan 618-GH and Credit 256-GH are no,1

available and the completion reports will be finalized by the end of April 1975.

SUMMARY AND ACTION TAKEN OR RECOMMENDED

Ji. Contrary to information we had received earlier this year, ECG has not prepared. any meaningful documentation on a possible third IBRD project. ECG' s new Managing Director however gave the assurance that all documentation would be available in July 1975 to allow possible appraisal in the fall of this year. To aid ECG in the project prepara­tion effort, a letter, with our cormnents on available project documenta­tion, has been sent (Annex 2).

5 . VALCO is definitely exercising its final option of 55 H\: under the Power Contract with VRA and is expected to press for an early power rate agreement on the rates for the additional 45 MW, which it needs in order to operate all its five potlincs 8t maximum profitability. VIM. is expected to consult with the Bank in the next few weeks on what the level of an "acceptable" power rate might be.

6. fliscussions on a revision of the Power Tuite under the Power Contract are likely to extend over several additional months. VRA requested a formal Rank position on the Shawmont tariff study which is meant to form the basis of future negotiations. We would recommend not to take a formal stand as the mere appearance of siding with either VHA or VALCO could prove damaging for the Bank.

7. The quantifiable benefits of the Kpong hydroelectric project will be represented mainly or entirely by incremental power revenues so that bulk supply and retail power tariffs will be a major issue in the economic justification. The particular rate charged to VAIJJO under

, $ . ( I

\ . P,,-, ,

v'

- 2 -

the Power Contract of the Master Agreement is, however, a political rather than an economic issue (see para. 6). Nothing can be said at this stage B.bout the possible inclusion of an irrigation component which is to be studied shortly.

ECG Third Distribution Project

8. Contra~J to the claims of ECG's form.er Managing Director (see Mr. P. Rei tter 1 s memo of ,Tanuary 23, 1975), ECG has not finaliz,ed any meaningful documentation on its investment requirements. It is difficult to judge whether this was, partially or wholly, due to the uncertainties created by the rather sudden prospect of a change in ECG 1 s top management. As it turned out, ECG's management did not even have a clear view on the technical, economic, or financial feasjbility of the propos8d investments mentioned in para. 3 (1)-(.5) of the Government's financing requests of October 21, 197h (see Annex 1). It was even more surprisine that ECG had not formed a view on the January 197li study by Lahmeyer, covering ECG's low voltage requirements, although it knew of the consultants' findings for about half a year.

9. The new Managing Director (Hr . Duker) apologized for ~G's non-perform.ance but expressed confidence that under the leadership of Hr. Jones (ECG' s expatriate engineer seconded by the British South West Electricity Board) ECG would, after having first restudied its requirements, be able to furnish the Bank with all completed studies by July 1975. This, it was agreed, 1-1ould allow an appraisal in the fall of 1975 and Board approval before mid 1976. To aid Er.G in this effort, a letter has been sent (see Annex 2) containing (i) comments on whatever documentation was eventually submitted during our visit, and (ii) some general guidelines on our appraisal requirer,1ents.

10. 1~hile ECG' s reconsideration of its requirements from mid-1976 onwards is likely to partially invalidate the Government's proposerl project scope (see Annex 1) - and thus proposed borrowing requirements -the nature of the works is likely to continue to be (i) reinforcement of the low voltage system, and (ii) construction of 33 KV lines and related substations. The main justification of our involvement v10uld be the strengthening of ECG' s operations and management. ':1ear evidence of ECG' s deteriorating performance are the 197~- finR.ncial results which are likely to show that, for the first time, the 8% rate covenant will not have been met by a significant margin, probably by about 5~. This contrasts to ECG' s history of fair profitability. 1\hether this shaI1) deterioration in ECG's finances is the logical result of inflation catching up with tariffs-tmchanged since the early sixties, or whether ECG is fina1 ly feeling the effect of bad manacement during the last 2-3 years is difficult to discern at this time. Hov1ever, visiting missions have been consistently left with the impressions of a phlegmBtic top staff and little if any improvements in ECG' s standard of service (e.g. billinr, and collection). As on the occasion of past missions, ECG was again in the process of requesting the Government for tariff increases.

- I -

11. · ECG confirmed that, whj_le it buys on the basis of a preferential pr:i ce formula from A. local cable manufacturer (Kabelmetal), this arrangement is not of an exclusive nature and would thus not stand in the way of the Bank's International Competitive Bidding procedures since the local manufacturers would merely benefit from the usual margin of preference.

VRA.•s Expansion of Power Generation

12. Due to the departure of essentially all staff of Acres prior to our arrival in Accra, the mission was not able to benefit first hand from the consultants' final discussions. Thus all ques­tions related to firm capacity, cost estimates, the least cost solution (see para. lr (ii) of our terms of reference) will be con­sidered in the review of the feasibility study Volume I of which has

. ' been Just received.

13. On the question of VALCO' s projected load growth, it is now evident that VALCO is exercising its option for an additional 55 MH under the Power Contract which will increase its power take from 315 MW to 370 MW 1 /. VALCO has in fact begun the construction of its fifth potline wnich is estimated to cost about US$ 65 million and it expects the start-up of the facility in April 1976. VALCO's total output is thus expected to increase from about 150,000 tons to 200,000 tons per annum. VALCO is also expected to request an additional JO MW of firm power and 15 MW of interruptible power, which would bring its total power take to 415 MW. However, VALCO maintained that these additional L.5 H'l"1 were not essential for the operation of all five potlines, i.e. they can be economically operated at 370 MW, but they would increase the efficiency of the operation and thus VALCO's profitability, subject to the price eventually negotiated for this additional power.

VP.A - Tariffs

14. Considerable time was devoted to a discussion of economic power pricing and the principles contained in the Shawmont study of V11A's tariff; this study is expected to form the basis of negotia­tion hetween VBA and VALCO over the price of the sale of the 370 MlJ under the existing contract. Although the discussions touched upon

1J \vhile VRA has not received from VALCO a specific notice on the 55 MvJ option, the ongoing construction of the fifth potline and various correspondence is de facto evidence of VALCO's intentions. VRA is however now examining whether under the Power Contract some other specific format is required.

the tariff effects of all VP.A I s customers, the main emphasis was given to the pricing of VALC0 1 s existing power take of 315 M1•J, of the 55 Ml•! 1mder the last option and of the additional 45 Mi·J (see para. 13 ) • 'TRA stated quite unequivocally that it considers the legal validity of the Power Contract the overriding factor and that therefore it will price the 370 MW (315 MW + 55 MW) on the basis of the cost of Akosombo, and not on the basis of the cost of its next generating plant. VRA however assured us that it will only agree on the pricing of the h5 M\rJ after the costs of its next generating plant are known and after consultation with the Bank. Acres• study is now ready and VALCO is obviously pres­sing to settle the price of the 45 M\~. The Bank should therefore be in a position within the next few weeks to express a speci fie opinion, bearing in mind the considerations raised in para.18-21.

15. 1.~ith regard to the 370 :MW, it is expected that the discussions on a Permanent Contract Rate (see Annex 3) will take several additional months. Both VRA and VALCO are in the process of formulating their respective cormnents and it is likely that Shawmont•s report will not be finalized until some­time in Hay or June. As any now agreed rate is in any case re­troactive to March 1, 1973,and as VALC0 1s payment on the Interim Rate has probahly already roached its upper limit of US~ 1,950,000, no party stands to substantially lose or gain by an early or late agreement. VALCO may however find it slightly advantageous to delay settlement, thus saving the interest cost on any payment to which it may finally agree.

16. In our common goal to consolidate our respective views, we discussed the tihawmont study with VRA and stated that (aJ in general the study•s weakness was that it proposed only one, rather than several, approaches to arrive at a 11 fair 11 contract rate; (b) Shawmont • s rate on equity standard of 1'!orth American investor­owned utilities was a doubtful parallel because (i) equity eaminbs in North America are a function of capital market conditions and the rulings of regulatory agencies, and (ii) in any case the North American parallel could not be applied to VRA•s other customers without charges of discrimination; (c) as an alternative, VRA should study the effects of the 8% rate'on equity standard, laid down under Loan 618-GH, but on the basis of fully revalued assets; (d) we saw no difficulty with Shawmont•s inflation adjustment formula except that there appeared to be a serious mathematical error in the calculation of the yardstick for the rate of return;(e) given that the incremental cost of power in Ghana is expected to be

- 5 -

sj1'.nificnnLly hi.1'.hor thRn t.hu :\v(•r:l1:o cor;t-., W<' f1 1 lL it djCf1c11lt. to agree with Shawmonts' recommendation that the rate per Kwh to VALCO should fall with the taking of the remaining 55 MW under the Contract. A more detailed internal position paper on the above and on the accounting aspects suggested by Shawmont will be prepared short+Y•

17. VM stated several times its desire for an official Bank position on the Shawmont study, openly admitting that it may prove to be a useful bargaining point in its discussions with VALCO. Given the dangers of appearing to be the advocate of either VRA or VALCO, we recommend that the Bank should not take such a formal stand.

Economic Justification ~f Kpong Project

18. The consultants identify the Kpo~£ hydroproject as the least cost solution for the next addition to VRA's generating ca­pacity. As little is known on the cost/benefit relationship of the resettlement aspect and of the possible irrigation component -the consultants are studying the latter under separate terms of re­ference - we will address ourselves in the following to some major considerations of the economic justification of the power aspect only.

19. It seems clear that the quantifiable benefits will have to be represented largely and perhaps exclusively by the incremental pover revenues. Any incremental non-power benefits associated with an increase in VALCO 's p0v1er consumption in the future will be re­latively small (possibly onl:r some income tax revenues). Since preliminary indications are that VRA 's tariffR are helow the in­cremental cost of supply, tariff changes would be necessary to produce an internal economic return (IER) greater than or equal to the social opportunity cost of capital. In this context, it should be emphasized that the pricing of the 370 111 ; taken by VALCO under the e:x:i..sting contract has no direct bearing on the convential calculation of the IER because these sales would not enter into the incremental revenues attributable to the project. Uei ther does the probable pricin£ of the 370 Miv below incremental cost (see para. 14 ) mat:.er from the strict point of view of resource alloca­tion providect that the possible sale of an additional 45 MW to 1TALCC' (see para. 14 ) is made at incremental cost. The pricing of the 370 Mi-ii then determines the distribution of the economic rent attri­butable to the Akosombo project not VALCO's demand for power and is a political rather than an economic issue. However, the pricing of the 370 MW may have an indirect bearing on the IER if it prevents VRA from charginE other consumers (ECG, the mines and Togo-Ila.homey) the incremental cost of supply on all their purchases, insofar as they could accuse V"RA of practicing price discrimination. Should

- {, -

VRA in this way be constrained from implementing orthodox economic pricing an alternative could b8 to introducP a two-part tariff for all VRA 's consumers so that all incremen:.al consumption (i.e. the second block) is charged at economic cost. An obvious diffj cul ty, of course, lies in establishing the length of the first step for different consumers because problems of equity arise.

20. An Hddi Uonal complication in the area of power tariffs is that, for the IER calculation, VTIA. 1s sales to ECG should be valued using ECG' s retail tariffs (with allowance for electrical losses) and not using VRA •s bulk supply tariff to EGG. Thus, even if VRA 1 s bulk supply tariff were to reflect incremental cost, it cannot be assumed that ECG's tariffs to final consumers would be based upon the same principle. ECG' s cost structure will have to be analysed to assess the relationship hetween tariffs and in­cremental cost but since its tariffs were established in the early 1960 1s any relationships are likely to be fortuitous. ·

21. In conclusion, we beb eve that the economic justification of Kpong rests on (i) the pricing of its attributable marginal output; (ii) the cost/benefit relationship of any irrigation component; and (iii) the cost/benefit relationship of the resettlement aspect.

SAlber-Glan(~n/RBates/~am:cs

cc. Messrs. Thalwi tz (Director, 1:iAP) Pouliquen (Assistant Director, i·JAP) Rowe (Assistant Director, WAP) King (Assistant to the Director, WAP) Munthali (WAlDB) Denning (WANVP) van der Tak (Director, PAS) (3) Rovani (Director, PBP) (3) Bowron ( P&B) Jennings (CPS) Raizen (CPS) Reitter (Res. Rep., 1..A.FCHA) Hirza (Chief, \-JAF\'JG) 1·,'yss (Chief, \-JAFWA) El-Maaroufi (Res. Rep., WA.FlN) Asser (legal)

(-- ' \, ;

IN1ER~P.TIONAL DEVELOPMENT I INT[RNATIONAL ,Jt..,v. FCR AS'.;OCI ATI ON RECorisTRuCTI ON AND DC: v ::: Lv?MENT

OFFICE MEMORANDUM

CORPORA TIC~-.

AUNEX 1

.. ,o: Mr. Rene Ribi, Chief WAPPB DATE: January 23 • 1975

· p ' "'l,1: ,\\.. Peter Rei~"·

J E•_'. T: Ghana - Third Pcwe1r, Distribution Proiec:t - ECG

1. As advised in my cable of January 21, 1975, I should like to give you a brief sumr,ary of the status of pr2paration of the vario~s project components

...., by ECG Fhich I reviewed with Mr. Abaka-1·:ood earlier this week. In this connec­' ( tion, please refer to Hr. Basoah's letter of October 21, 1974, copy of which

was sent t_o _y~t1 ir_:i. __ earJ_y_Jfovember. __ For easy reference, I a"1 enciosing another-. copy.

2. Regarding item .1, i.e. the extension of the 33kv syst.em in Ter::a to three textile companies and the Tem3 Food Conplcx (conversion fron oil b~rning to electro boilers ), ECG h2.s co~pleted a_l_l _ _rel <2'.-ant stud:i;.s. accordir:~ to }fr. Ab 2'-:2.­Wood. A report is being coir.piled and will be available vhen the n.ission arrives.

3. The planning of the extension of ECG's distributi ::-:i system in the Sef'wi Winwso, Subin, A\7aso and Bibiani area is f .=. r behind s c:-.e cule, in fact only a pr-2liminary survey has been made. · Tne r eason seems to ::.ave been lzck of coordina tlc:1 or proper co.::..-nunication bet'.-'22!1 ECG and \~_!.... Last ?-!arc~, ECG approache d \'RA on the question of exte!".d i n ~ ;;·R.A's 161 'c.-:'.- transmission line fror1 its present ten:i.inal point in Dunk,;a ::0 .'c.:.;aso (~ir2ct distancE: betwc:cn . 40 and 50 ,7iles). VRA undertook to stuc.:r t '.,e r::atter c_a::- 0.'.fully anc. ta cor.va:;

••

its po s ition to ECG upon co~pletion of th~ engineerin; -s :~1ies anc: cost esti-1nates . . It cautioned ECG at the sa::::ie tice t'::at construc::ioii of the line, on account of exceedir,gly long delivery perioc.s for mater::.2.ls ~nd eq~ipe2er.t, woulc: take a minimum of 2-3 years. even if funds ~ere readily availabl e , rather than one y c. ar a s ECG had envisaged. VR} ... sugg e sted. therefore, that ECG continue wlth its program of providing tereporary ger:erating pm,e::- to the various const.:ce.cs tn the Rrea, and plan the extension of its distributicc network accordingly, re-sardless of VRA' s final decision on the 1:'.atter.

4. 1"nere were no subsequent follow-up cc~t2.cts or discussions beti:-1een ECG 2nd VI''-1\ until I raised the issue with Nr. Pl:>2.ka-Vood 2nd ~{r. Quartey last Novenber follmdng receipt of Hr. Baso2.h's letter. At t::at time, as I reporte:: to you, V-p..A had .arrived _at_ rather negative conclusions -.·i thout, ho-;.,ever, convey::.:-,g its position to ECG. In the first instar,.ce, the estir::2.teci load of about 5:'.\·l, i:1 VR...\.'s view, r.i.ade it difficult to justify the extensior.. 2.t a cost of 2.bout ~50,GOO plus per mile of tr2.nsmission line (the li:1e. '\-:Ould cross rugged terrain and untouched rain forest). Secondly, VRA was not sure, le.2.ving aside cost/benefi: considerations, whether in view of ot~er poter-.tial cl.::.i=-s on its present hyd-::-o capacity and estirr..ated potential for exp2.nsion, the SUD?lY of pm,er to the ~estern Region was feasible or desir~le. ~X?ansion of ~CG's diesel generati~g capa c ity and ot~er captive plants in the area was there:ore not tc be ruled o~~ as a possible alternative. Lastly, \TR.A s2·., r:o possibility of fina.;:cing the trans miss:'..on line \·:ithout outside assistance. · I"- H 2 O 10"7:-

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J 5. On :.iccount of th 0 sr:! ,1n<l oth,3r ,nn:,idP.t';1t-ions, \.hich ns I said .. ere not conveye.:t to ECG, VR.A dc:ciccd to Liefer any c],2cis:Lon on the mottcr pending the completion of a study of \1tA's e1,tlrc tr:cnst'ission nctworl:. The study for

'

which VRA cor-;;-:issioned Italconsult ,:ind for v:hich the Italian Governr.ient ;:irovided a grant. of US$146,000 at the end of Nove~ber of last year, is to assess the capabilities of the ,;arious sections of the transmission system in carrying present and future loads, and to determine possible needs for strengthenin8 and expanding the net,,ork. The consultants are expected to commence work this month and to submit their report by July or August. No decision by \!RA on the transrrission extension proposed by ECG was therefore expected before the latter part of t.his year.

6. This position ,:as finally com:nunicated to ECG in late November. As a result, ECG indicated that it needed to reexa~ine the possibility of proceeding

·with the distribution expansion in the absence of any corr~itment by VRA, and consequently decide ~:hether to exclude the item from the proposed project or not. A decision was pronised by mid-January.

7. Last Monday Hr. Ab2.ka-Hood informed r::.P that VRA had decided to extend the tra;J.sci.ssion line after all and had conf.'-:ied it to ECG in writing. He was not in a position to provide any explan2.tion for this change~ and I ,-ill therefore follow up ar.d clarify the rr:atter ,:ith VRA. He did emphasize, ho .... ·ever, that the 1·:estern Region expansion ,;~as of high priority and that ECG definitely ~anted to have it included in the proposed project. The relevant studies~~re expectec to require a ninil!lUn of 4 ~onths, i.e. they are unlikely to be completed before mid-1975. The mission will obviouslv have to look into this in detail.

.. - - ·-- - - ·- . . - ~-- ---·----- -

8. Itens 3 and 4 are largely completed, according to !-!r. Ab aka-Wood. Sor..ie supple~entary data and information are being cornp1le~ and should be available by the ti2e the mission arrives. Items 4(c) and (d) are part of ECG's rural electrification program.

9. Item 5 is completed .and all infornation available.

10. Concerning iten 6, the Low Voltage Distribution, I sent you the -entire LAH}fr:YER study. 12.St SepteI!!ber~ I had received the report from the consultants on a personal basis, and I don't think ECG is aware that we have it. ECG's comments on the report should have been prepared a long time ago. ·whether they have been or not, !fr. Ab aka-Wood confirrr:eci,, that they will be available for review by the mission.

f. 11. Since I have not seen any of the studies or reports, I obviously cannot JI judge to ~hat extent they are complete. But t~ere should be enough inforni~tion 'I available to the mission to advance the preparation of this project • . ,

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cc: Hr. D. Dutt

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Rc~i<lent 'Hssion in r:h;mn 'P. (). '.'oY. 'f. 27

Acero

Hr. R. A, Baso.=ih Director of Flanninv. ntnistry of Fconomic Plannin~ P.O. Box }f.7(i Accra

Dear }~r. '!'3a9oah:

l'ROPOSr:::1 THIT:'.) rn:i7R DIST,,,rr.~:rro~r p~_(lJ~CT T~ ~J..'JA - •

1 l!Cknovlcdf;e vith tn:m:;.• t!"tnn':<.s receipt of yn•Jr lett~r or '1ct"""r "?1, 107~

{Ref. ~1~\/EA.D/413.~) concerni~~ the prooo~e<l'~xonnsion oro~rR!"":"'.P. ~v t~~ ?lectr1-city Corporation of 1shanc1 for po'\..'P.r distributi.pn, anrl your r.overn.nent' s re'l\tcst for Bank Gro:.ip ns~i.atance in t!-,e finflncing of. thi5 nroject •

• t have fonrnrde<l the !!'h'lttcr to the Rtmk in TTAshins>ton for consi~1cr:'ltlon. In nddition, "'e h&ve initi:ite<l direct rliscussions •,rith t~e m11!1av.er.ent of t'le Ele~tricity r,orporation in order to estahlish a tirn?tRhle for the ore~~~ation

,ft.nd -procossing of the pr0_1ect. ECG hns undertaken to orov1.de tl.9 },,, t'-:~ enc-! of January 1975 at the la.test '-!1.t~ r::ost of t~e =JturHe~ pertr1.ini.n? to t,,c -:if~~r~nt ele~~nts of the proposen third ex~nnsion ph&Se. If t~is tireet~hle ca~ ~e nAln­t~ine.d it should be po!3sihle for the R.'1nk to sc}le<lule the ap;,rai.1al o: t:-tP. project in }!arcl-1 or April of next yenr. ---- -------

------·--- ---- . --- - -- --·-

I will naturally keep you infotued &bout these Rn~ other related ~tter.1 \as a result of my consultations with TfashinP,ton.

Yith best re~ards,

Sincerely yours,

reter ~eitter Resi~ent ~eoresentative

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P.?ilrC':s·-:J T'.'I?.D ?C'i")'. DISV.~---::.'7'.:''t ??O,!'::C? .L~ v:~.:~; °"

I C.tJ 7i'""ritL'15 i.."1 CO!:!'.l·::t:.ari. ~trit:: ::i~ :;:--::>~r:>.::::C. c:~::!...':~ion proc;rn=..::e 11 or cii:;t~..:..bc.tic!"~ i:i Gf' .. --:ill ?:"C?C.r·~.:1 L.}"" t~c Ll(;ctrici~J C917orctio:1 of G::..~:i::. (EC'.",) ::.:-.d cJti.::::l:-::3. 1:0 co::;-c u:.:.::'10 c.illi:m 0~ v:hich tho 1'orci91 C:t:Ct:'.:..::.£;9 CCC?O!",C.c.t is jj;::,::;G.6.

2. You r::).y rccc.11 ti:ut i:, 1971 TI.\ ~~:-.td to the G-Dvcrn!l!.2nt n credit of L3.17 o1 ::ri.llior. :::i f'in.:.:-ic e t!.,::: :'o rcis;: c::c :-,ar.1::e cost o-J: the .s eco:-d ph..::se po7;er e::p!"l::1:;ion p:-o!'::-.:-.:-.:::e in Gr.:.:-..:.. The worl:'.!l on this p~nse of the de,~lc~:-~~t pro~:-2.::.::::'.e are e7-?ectetl to be cow,;ileted vs:-:.; ::oor.. c.nd n ~:-:.:..:·d prose o:f' tr-.e proc:;:::11c..:r.e is scheculec. to coo=.~~ce cs soon cs possible if t~~ r..ecessary fi.I:cr.ce r.ould be nvailable.

3. Tne nh .. 1.s e 3 p::-ce;r<'.\i:-_c:e p::'o,"ide:i :'.:;::- r.ei..~x~o!':c::.e!"!. t of our lotr voltage sy;te:-.3 pc:::-ticuL1.r2..:r i..'1 ~cc:ro, ~..:.::;., S2.::cr.c.i./~kor.:.di end Tc::.n nnd nl!:.o for t~e cxte~si0n ·or t::e e..'T.:i..st:....'1G electriccl distri­·bution syster:::,. 'i'.r.e proe;r::.:.:-.e involvc3 -.:r:"e follo~-ig-:-

1. Extension.3 to the 3.5kv syste::. L'1 ?er:::i to m:.:e it possible to . oeet the L-ic::-e::se:ci d.er:-z,.n::. for.p;::,;:er by:

1:fc)) '.i:'e?:n Textiles Ltd,, '-:,_

(b) Gb.nr.!l Textiles l..'.,,'l.nufoc,·..:..-r-i.r.5 Co.

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' ! The incre£1sed loc::s nre for elect::"o boi~ers.

:Ert<.:.nsio:i of si...-;;:ly to Sef.,:. Q,,c.,;sc. S·,:;:Ll.. 1 L.--:!!;_'lp....£':2L Ei t· in:-~. IT..i:i is -::, s u;i .?lY ~:"~c C-l.~:.:; t: 2:1 ':i:-::>er Cot::?le:{, the C-oTI :5ne nt 51.2':::in, 'tr:e ;:.::.u;.:::_te ~·;:ic nt A~so, o.nd n n~i7 f:.1.ct.Jr.i" nt .:::.:i::.n._~. 2.c:vre ~~-sse c.:-e su;,plied., V?.A 7Tlll 1--..c.ve to e;~tend the:i:::- 16 11.:-v line3 froG.1 Du:..!::wn te J.,;;n SO<>

Ex:E::1sior: of sup;-2..:r to wtos~ct'"r 'Jerks on the Kv.-ahu P..:.r..e;e. A 33 Kv li.."le r:oi;J.c:'be c:i...-.st!'uctcd f'rcm H::.-:.r.Y.!l'l'r to Y..::>to:,o cr:.d substc~'"l"Sestnt~'::::e:..· ~u~;:.. ,.,..:'-U.. ,<,-• ._._

4.. Co:-,.stn.iction of t::e folio.Jing 33 Kv lines cr.d the nece!lsnr-J terti..'1.nl equip~nts:- •

(n) Odorkor to ~eijn;

(b) Bur::o "~ill~ -;e-'i'e&bi e or," 1.i'.W.~;

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~ Kur::.o.si to B£:::,,-;:ii.

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6. Reinforcement of the Lo'l'7 Voltaj;ft Pi stribution s~tE:t'-' in oil the c..jor to.ms.

4. It b hoped th.at the foreign exchange cost of the project (estiz:'ated ot US,18.6 million) will com~ from ID.A func13.

.5. I r.ould opprecinte if you r.ould for-,,-ard this reque::it to lDA in Uoshington for early consideration.

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-~~' -· ~ "·t!Moging Director, . Electx1city Corporntiori, }.ccrn,_

n-ie Senior Principnl Secretnry, lJ:inistry of FinD.nce, J.cc,.m,,

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INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT C.W. .u.a-, - INTlu.AO

INTERNATIONAL DEVELOPMENT ASSOCIATION c.Yo .A,U,.., - IMDlflJ

1S18 H St....t.N.W:. Vla,hloftoz,. D. C . 20.33. U.S.A. "'- c.&.:IOQ • T.a.,-..-ax- 9'6MO

Mr. K.A. Duker Managing Director Electricity Gorporation of Ghana Accra, Ghana

Karch 20, 1975

ANNEX 2

Reference:

' q

Preparation of Third Electricity Project ECG

I Al

Dear Mr. Duker:

Following Messrs. Alber, Bates, and Thiamls recent mission, we have now had the opportunity to study (i) the available documentation on the investments proposed in paragraph 3 of the Ghana Government request of October 21, 197L; and (ii) the Lahrneyer Report of January 197L on the strengthening of 11JG•s low voltage system. we should like to provide you with our comments to assist your staff in completing the studies on :&:GJ s requiranents. As discussed during the meeting of February 20, 1975, we would be grateful ta receive all studies by July 1975, so that IBRD appraisal can take place in the fall of 1975.

We should like to confinn that the package to be proposed for IBRD financing should be part of a three year program conunencing around mid 1976. As you know, we also should like to include i...!!_j;he thir_g. lending operati.i::m~ rural_electri.J'icatiog_component which, we hope, you would be able to identify in.. Y:.OUI'.' proposal f....Q.:Li,h.e above pahkage. In tliis connection, we should appreciate receiving a copy of t e 1971 Report of the Committee on Rural Ele·ctrification which Mr. Fynn said he would tr.r to obtain for us. The base line costs of the package should be determined at mi_d 1975 prices with proper contingency allowances added. At present, the Bankts own estimates use inflation rates for equipment of 8-10% p.a. over the next five years ( see attachment). 'lhis estimated cost should then be incorporated in ECG• s longtem financial projections, i.e. income statE!!lents, balance sheets, and sources and applications of funds. In order to gauge realistically :&:Gt s financial needs, forecasts of operating costs should also include allowances for price escalation. As to IBRD borrowing, you may assume an interest rate of ~.5% p.a., a grace period equivalent to the con­struction period, and a total term of about 20 years.

. ··1/

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•

After reviewing the Lahmeyer Report and other IDG project documents, we are able to make the . following comments. We assume that Lahmeyer will have to re-calculate their figures since :FXX}ts requirements, prices, qua:nti ties, and stocklevels are roost likely out of date. · In addition, ECG may want to identify (i) the low voltage requirements outside the major four cities, and (ii) the requirements of reinforcement of underground cables; both of these aspects were excluded from the Lahmeyer study. In order to be able to support an economic justification, we would like a clear statement of (i) the method of estimating losses which is unclear in the Lahmeyer Report; (ii) the evaluation of such losses; and (iii) the calculations detenn:i.ning the economics of replacing lines ( see page 31 of Lahmeyer Report where depreciation of exi.sting lines is treated as a cost). Also, we would appreciate receiving your records over the recent years on power failures, their number and duration, and your proposals to reduce illegal connections, which appear to be especially prevalent in Kumasi. Projects to be prepared entirely by ECG·• s own staff need the usual justification of demand, including documentation of actual requests by potential customers and technical feasibility studies. Given present uncertainties, the proposed service to the industries at Sefwi, wiawso, ~'Ubin, etc., should be studied with and without the proposed VRA•s 161 KW line.

' Please do not hesitate to ask arry questions you might have on the above matters.

.'.:>'incerely yours, • I

. r ' l .,

\ il~. Rene A. Ribi

Chief, Public Utilities Projects Division Western Africa Regional Office

cc: Mr. R. Basoah (Ministry of Economic Planning)

Attachment

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C<':bl:..i VOLTA.ACCRA

The Inter national Bank for Reooll3truotion Wld

Dovolo:)mont, Went Af:d.c,:.,n Regional Office, 1818 H St):-e,1t, N.W. V/a.shingtml D. G. 20433

Gentlemen,

P 0 . BOX M77.

ACCRA.GHANA

MEMORANDUM· OF AGfu."'m.!ENT ON VALCO POVT.E'.'."l RAT~ ' -..,· ..... .

--- ·-1. In fa3 course of the negotiationa lead.i.ng to the Third A.mendment to

the Por.er Co:.1tract between Valeo and this .Authority, it was agreed botwean the p.u·ties th.at :further discussions would bl';) undertaken between Valeo and the Au t~1ori ty with recard to the price for :rxn1er now nu.p;iliei and the price and qu'lntity of powor under option. Following e. series of disouRsions between Valeo and the Authority, the foll.owing formula. has been agreed upon for achieving this purpose:-

( 1) Valeo muld pay, as from 1st March, 1973, an addition:ll 0.375 United ::,tates nills per tmit ( "Intel.·lm Rate Increase") for the Au t.l-iori ty' s power. That is to say, f'rom that data, Valeo would pay the 2. 75 mills par unit provided. for in fue Third Amendment plus another O. 375 mills per unit (i.e. 3.125 mills per unit).

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( 2) The Authority should build a third doubla ciroui t trans.mission line from .A.kosombo to Te:na. within three years.

:::;;,

(3) An independent and reputable Consultant would ba appointed by the Authority, and pa.id w.i.th funds provided by Valeo, to study and roview the power rate and make recomm;:inda1ion.3 which should not be de8lll.ed to be binding on either party. Both parties would be given the opportunity to present their views to tho Consultant and would subsequently meet t ') discuss the Contultant's recommendations, in an attempt to arrive at a mutually acceptable figure as the permanent rate for powr,r.

• ••• /2

(4)

(5)

( 6)

2 -

In the event of Valoo and the Authority failing to reach a.ercemfjnt on a permanent ra.te or agreeing to a figure less tha.n 3.125 milln per unit, then any portion of the a.deli tional o. 375 mills per unit pa.id by Valeo to the Authority which is not covered by the opo:t·ative permanent rate should be deemed to be a repayable advance by Valeo to the Authority for the construction of the Akosombo-Tema third double cirouit transmission line.

On the other hand, should the agreod permanent rate exceed 3.125 mills, Valeo should pay tho difference to the Authority with effect from 1st March 1973, unless otherwise agreed.

If no agreement is reached on a change to the permanent rate by the time the Interim Rata Increase equals US

50,000 the payment of the extra 0.375 mill8 per unit d cease unless othorwise agreed.

( 7) The Power Contract, as hitherto amended, shall remain in force subject to this Memorandum of .Agreement.

2. The particulars of this agreement have been inco11)orated in tho enclosed draft Memorandum of Agreement the text of which has been mu-:;ually settled between the Authority and Valeo.

3. Under and by virtue of section 6.02( d) of the Authority• s Loan Agreement vd. th you dated 23rd June 1969 (Loan No. 618 GH) we hereby request your consent to enter into this Agreement "Ki. th Valeo.

Kin<Uy let us have your raaoti.on at an early date.

Yours faithfully,

E.A. Mensah AG. CHIEF EXECUTIVE

The Chief,

P. O. BOX M77,

ACCRA . GHANA

D1llt(9. February 12, 1975.

Public Utilities Projects Division, Western .Africa Regional Off ice, I. B. R. D., 1818 H Street, N.W. Washington D.C. 20433, U.S.A.

Dear Sir ,

9UAJ:tTERLY REPORT O " VOLTA RIVER AU'l'HORI 'l'Y f • '

I f orward, herewith, a copy of the Authori•s Quarterly Report for the period ended beptember .30, 1974 •

• A . Mensah AG. CIITEF EXECUTIVE

FEB 211975~ t1t1.'C.& aeo'd - ---~---

lf-t s-1r--.;L. Dato Aak'd. --- - --------

/ signed to~~~

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. '• ''.. • ·~ ... \! ,. ' -.;;.r ~ ~

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';) c- c~ i: .. n ' E ~ t t L. ·' L 4 ?.,J

1975 FEB 2 I tUf fO: I 6

COMMUNICATIONS SECTION

Form No. 27 (3-70)

)~ bit

INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION

TO:

COUNTRY:

TEXT: Cable No.:

AUTHORIZED BY:

NAME

DEPT.

REITTER

INTBAFRAD

ACCRA

GHANA

~~

OUTGOING WIRE

DATE: FEBRUARY 3, 1975

CLASS OF

SERVICE: ~ (Ext. 2617

t-:r/ rr(

RE POWER MISSION STOP PRIMO ALBER BATES .ARRIVING FEBRUARY 13 GH 549

COMMA THIAM .ARRIVING FEBRUARY 14 MY 202 STOP SECUNDO RURAL ELECTRIFICATION

TO BE REVIEWED BY BATES TIME PER.MITTING AS CH.AIJ..A VISIT CANCEIJ..ED STOP

TERTIO MISSION HAD PRELD1INARY DISCUSSIONS WITH CPS ON POWER RATE STUDY

WHICH IS STILL UNDER REVIEW RF.nARilS

RIBI

NOT TO BE TRANSMITTED

CLEARANCES AND COPY DISTRIBUTION:

Rene A. Ribi SAlber:fin

West Afrif(

SIGNATURE --------,-"---.;l"cr'~---:---:-------=--=----:---:---:--1 <SIGNATURE OFJ INDI DUAL AU T HORIZED T O A PPROVE )

REFERENCE: 618-GHA Volta River Authority

ORIGINAL (File Copy)

(IMPORTANT: See Secretaries Guide for preparing form)

INTERNAT I ON AL DEVELOPMENT \ 1NTC W./AT10NAL BANf: roR ASSOCIATION RECON S1 RUCT I ON AND DEVELOPMENT

INTERNATIONAL FINANCE CORPORATION

c,. j_ ,S-l,.

!0$t-~ 6,1~

f/OJ'/ µ7 cl'>.? TO: Messrs. s. Alber-Glanstaetten,

B. Tliiam (H.L-PB) R. Bates and DATE: J anuary 31, 1 ~75

rt CA.:i'-'-°'- - Pot<> e,,i, S' .rc/-e,t­ECG- .lIL FROM: Hene ·'\. R.i.bi (Chief' 1:2''\PPB)

cl G--~ ~ - VJ!. A . 7 e-..--SUBJECT: Gfo\:TA -

~-TI-i-i ,..d ~lectricitv Distribution Project ( ZCG) - Preappraisal Kpong H<Jdro :Slcc.tric Proje ct (VLA) - Preappraisal Collectio!1 of C0·11plementary .Lriforriation (Credit 256-GH and Loan 618 ,G H) Terms of .R.ef:;r~!1ce

1. Hessrs . Alber and Bates cci,u.ng frora the IvorJ Uoast ( sec ss-parat'?. Terms oi' H.eference of January 23, 1975) should arrl ve in Acer 8. about February 13 , 197S, for about a 10 days visit. E:r. T'>ia:m, cor:tinG from Caine~oon ( see Terms of Reference of Janual'.'y 16, 1975) i3 scheduled to -join the 1riission on Februar.r 14 , 1975. You shculd fully coordinate your· acti v'..L ties in Gh;:ma with Mr. Rei tte:c. Mr~ J:late.s on h:Ls way bad·~ to v!as:1in[_;ton shouJ.d plan to d..i.sc:J.ss ulth Hr. R. 'l'urvey ( JJa.nk corsultai1t) in .London a1,y i111portru1t ecO!lOr;ri.J issues . 'l'hc purpose of youi' visit is

(i) to assess the st:.1ge of project preparation of the third expansion prograi,1 of the 1s'lel:t:r.ici ty C.:orporation of Ghana (Ji.l...iG) and to establL,h a tirr1etable for b.ppraisaJ_;

(ii) to rev.i.m·' the ti.min~, cost and econo1:1ic justification oi J-hrui:1 ts next po,rnr generPtion scheiri0; and

(iii) to re.fine the available information, princip2lly project cost, re(]_uircd for the cc1.1plction reports or Grodi t 256 and :::,0.111 61 t3.

ECCJ-1 s '1'}1ird Distributloll f'roj ec;~

2. AL the end o: 197L the Guvcn,.,-1ent of Ghana rcqc1csted IDA fina.nci.r.z for a p:t'Jgr~.,;1 of -... orl-'.:s "i·Jith a forei~;n c:,:c}11.nee co!·,ponc11~, of about u::;:;,')JJ J1ullio11. Besides pr0Yicli...11e; for -Lhe rc:i r:~orcc:.1e11t of tho 1011 vol t,.,~e syste1:1, the pro gr an would. iT1vol ve ex:i,e:'l.ai.x1 of e:x:istinc and con.:-i cruction of new tra.I'si.d.ssion lines. Accordi-1'.·; -Lo 1'1r. } e.i.tter (see mei;1orru1rlurn o;: J anm.ry 23 , 197S) i,tudios for all e'.t.cmEonts are substant.i.ally conplet.ed, except for some distrlbut:i.on faciliti es depende."lt cm the ex:tens.:.on of a 161 kV tra11snt.ission line to be undert;.iken by Volta lU.ver Aut}Jorit.y (VlU1. ). In t he lieht of tlJG rel.::!.ti ve lmpo 1.'.'tance, the likeJ_y justification, ,md tl10 ti1:1iLg of study c01.,plotion, oi' this pro;iect item, you shouJ.d asses::: whether it should be included in the prospocti ve Bani< project and for when an appraisal of this project can b8 sclteduJ.ed .

3. You should pay particuJ.ar attention to

(:i) the compatibility of JD..;G•s assumed demand growth with \TH.A 1 s s r.ste;n capaci tJr as analy~ed by .Acre.s ( see para. l.1);

- 2 -

(ii) the feasibility of including rural electrification works into the Bank project; (if tir.le per:nits, hr. Bates should broadly revieu the local e.,cperience on rural ele'ct,rification in line with the consideratiom raised in our letter of Janua.r.r 9, 1975 to Hr. Hei tter) ;

(iii) procurer:ient problems which may arise out of an agreement which £;~G appears to have with .a local cable manufacturer ( Kabel.-rnetal); and

(iv) th'3 particular time slice of Er;a.1 s invest:ne.11t require­ments to be financed ana ·e,he possibility o: lengthening i t for t.he case a larger Bank project would malce sense.

VHP.•s E::man3ion of Pmrnr Generation and the Kpor.g Pro;j~

Li. In the couroe of the discussions of the above subject with the GhanaLan Governr•1ent, VR..t\. , and VRA•s consultarits, Acres, you should~

(i )

(ii)

on the power den.and side, ( a) try to reach a judgment on tne fac-Cors-that, r.1ay a__;_'Tect Valeo ts pJ.an.s to increase its demand b;y trucing the opt Lrm it has in the master agree­mc:1t to o1,ta.i.n cunpl;t fron \Tl?.t; oi.' a further 55 W·: fo1.· a fifth potlinc; (b) to rwal1'r-tte the urG2ncy fD:c Valeo t0 obta.in 30 li}/ in e.--:~es3 of the above 5S Vii'J; ( c) to as.sess the size and likelihood of ne1v L1rge industrial load.':; taJci.ne; into accou.,".1t the possibility that sone large con­sumers !!lf\" hav<::1 pl;,ns to ST,itch from oil to electricity dri v0J1 facilities; ( d) to assess the m:pected development of ECG' s de:nand;

on tho sunply s~_dP, ( a) urge Acres to give a precise de­finltion"of 11 i'i.rrri capL1.city 11 (in my opinion it should he forinulated in terins oi' cG.pacit.y av-oi.lable with a ce:ct:d..n rninimn;i probability); (b) :,~ind out fro.1 J\.cres what the s upply characte:cisi:..ics of the ~rsteirt Al:osoinbo/Kpong would be taking into account the h;ydrology of the vol ta H.:L ver during the very dry past n ve years; ( c) reach a judgrnmt on the cost estimates for the KponG pla.nt and the related cost of resettleuwnt and of losses in agricul turaJ. land and product.ion, etc.; (d) ascertain whet}ier or not the consultants analysis still indicates clearly tl1at Kpong is the l eas·c. pre::;ent cost addition to VR.Ats sysl:,erri.

- 3 -

S. Concerning the upcom:irig tariff negotiations between V"RA and Valeo, and the Shawmont study oft.he power rates which was supposE:d to produce: a basis for these negotiations, you should take the position that the B3.nk welcomes negotiations and wher.3as it would not wish to side with any party and had no preconce:ived idea about the level of tariffs, both parties should take into account that it would be extremely difficult for the Bank to af:sociate itself with the construc'c,ion of the Kpong plant if tariffs did not m a reasonable way reflect economic cost of supply. If asked about the specific benefits of the tariff stuct..v ~rou should limit your corr,ments to the technical aspects discussed with C.t1S. Should the further analysis of tbe study with CPS produce additional corclusions important .for your :nic;sion, we would inform :rou by phone.

6. Hegardine VitA 1s intention to .:1ppro2.ch the Bank for retroactive . financjJ1g of prel:Lrni.i,ary engineering and preparation of contract docuncnts, you should explain that aparttfrom the usual c3.vca.ts retroacti.ve financi...'1g of engincer:;J1r; cost up to one year prior to J.oan ap;lroval co1tld be consi­dereJ, hut tl1at it would not be proposed before the Bank would havo a c learer view than it prer.cnt.ly has of the economic J.1s tificat.io::1 of the project.

SAlber/,-illates: lJn

ClP,JJ'<?•:l Fit.h & c~1 l·!~ssr:;. Thal,·1itz - Director, H!\l' l1~unthali - ~JA1DB

cc: :Messrs: l'ouliquo;.1 R01,k

Denninr, van dcr rak Rovani Bowron Reitter llirza Hys~ Bl Eaaroufi

- A0st. Directo!:', WAP - Asst. Director, W\P - Proc;ram Coordim. tor, W1\.,~VP - Director, PAS - Dirac tor, PBP - P&B - Res • Rep., WAPGt~ - Chisf, W/J<',JG - Chief, hf t,.H/1,. - Res. Rep., WAFUV

form No. 27 (3-70)

/ <', C,-k~ -i.':,L;'..'.: ~ .::...- , r.,.., ..... loo. ... ~ t lo _ .___..--,. ft C ~ - ... .. . .,,,,

·1NTERNATIONAL DEVELOPMENT (" r Cl1 -''-u. , C°)

INTERNATIONAL BANK FOR INTERNATIONAL FINANCE

ASSOCIATION RECONSTRUCTION AND DEVELOPMENT CORPORATION

TO:

COUNTRY:

TEXT: Cable No.:

AUTHORIZED BY:

REITTER INTBAFRAD ACCRA

GHANA

tJb

OUTGOING WIRE

u· DATE: January"?,- 1 975

CLASS OF

SERVICE: ( LT~ ((}

Ex.2617

RE POWER SECTOR STOP ALPHA PLANNING '!WO WEEK MISSION COMPOSED OF COMMA

MESSRS AL~/ BATES AND THIAM COMMENCING DURING WEEK OF FEBRUARY 10

TO PRIMO FDLLOW-UP ON ECG PROJECT PREPARATION COMMA SECUNIX) TO

COMMENCE STUDY ECONOMIC JUSTIFICATION OF UTILISING LIMITED HYDRO

RESOURCES TO MEET PROJECTED I.OAD COMMA TERTIO TO REFINE INFORMATION

FDR COMPLETION REPORTS (CREDIT 256 AND LOAN 618) STOP BETA CENTRAL

PROJECTS TENTATIVELY PLANNING RESEARCH EFFDRT DURING SAME PERIOD

BY MR CHALLA TO REVI&J' GHANA'S RURAL ELECTRIFICATION PROGRAMS STOP STOP COMMA

EXPLANATORY LETTER FDLLOWS / PLEASE CONTACT ECG / VRA AND GOVERNMENT

STAFF ON MISSION TIMING STOP REGARDS

RIBI INTBAFRAD

NOT TO BE TRANSMITTED

CLEARANCES AND COPY DISTRIBUTION:

NAME Rene A.Ribi (Chief, WAPPB) Cleared and cc: Mr. Munthali (WA2DB)

cc: Messrs. Thia~ (WAPPB) DEPT .• West Afric<}, Projects., Public Utilities

SIGNATURE J 1L I SIGNATURE OF INDIVIDUAL AUTHORIZED TO APPROVE >

Bates (WAPPB) Challa ( CPS)

REFERENCE: GHANA - POWER For Use By Communications Section

)

ORIGINAL (File Copy)

Parm No. 27 (3-70) I ~-·~,!+-, ~-.'-~ --

........ A ·1~~TERNATIONAL DEVELOPMENT

rC-h~ -G-10. 0--

INTERNATIONAL BANK FOR INTERNATIONAL FI NANCE

ASSOCIATION RECONSTRUCTION AND DEVELOPMENT CORPORATION

TO:

COUNTRY:

TEXT: Cable No.: .

AUTHORI ZED BY:

REITTER INTBAFRAD · ACCF..A

GHANA

OUTGOING

DATE: January 7, 1975

CLASS OF

SERVICE: LT

Foc.2617

RE POWER SECTOR STOP ALPHA PLANNING 1WO WEEK MISSION COMPOSED OF COMMA

MESSRS ALBER/ BA.TFS AND THIAM COMMENCING DURING WEEK OF FEBRUARY 10

TO PRIMO .FDLLOW-UP ON ECG PROJECT PREPARATION COMMA SECUNOO TO

COMMENCE STUDY ECONOMIC JUSTIFICATION OF UTILISING LIMITED HYDRO

RESOURCES TO MEET PROJECTED IDAD COMMA TERTIO TO REFINE INFORMATION

FDR COMPLETION REPORTS (CREDIT 256 AND IDAN 618) STOP BETA CENTRAL

PROJECTS TENTATIVELY PLANNING RESEARCH EFFORT DURING SAME PERIOD

BY MR CHALLA TO REVIEW GHANA 1S RURAL ELECTRIFICATION PROGRAMS STOP STOP COMMA

EXPLANATORY LETTER FOLLOWS / PLEASE CONTACT ECG/ VRA AND GOVERNMENT

STAFF ON MISSION TIMING STOP REGARDS

RIBI INTBAFRAD

NOT TO BE TRANSMITTED

CLEARANCES A ND COPY DISTRIBUTION:

NAME R-e ne A_.Ribi (Chief , WAPPB ) Cleared and cc: Mr . M1.m.th21i (WA2DB)

cc: Mess rs. ThialJl (WAPPB) DEPT. West Afric ~ Projects, Public Utilities r I 11 / & I . . .

Bates ( WAPPB)

....

S1GNATURE ------'.,'.J..,,µ..' ..-,,1\..,,,...._ _________ --:-_____ I

cS1 GNATVRi£' OF I NDIVIDUA L AUTHORIZED TO APPROVE> l------ ----:----:---:-------For Use By Communications Section

Challa ( CPS)

REFE.!ENCE: GHAHA - POHER

. ORIGINAL (File Copy) 1 f ) Checked for Dispatch : _ ., / ~ (JMPORTA~T: See Secreta ries Guide, for preparing orm

,il.. lber-GJfo.,.1s'tae tteri./it. _ . _ . __ .. __ . _ __ . \_;V \ /"- ARNOLD GRAPHIC INDUSTRIES. INC

form No. 27 (3-70)

INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION

TO:

COUNTRY:

TEXT: Cable No.:

DR. APPIAH MINISTRY OF FINANCE ACCRA

IOC GRL\NA

OUTGOING WIRE

' DATE:

CLASS OF

SERVICE:

DECEMBER 19, 1974

REFERENCE OUR OONTOOLLER I S LETTER OF NOVEMBER 6 ID VRA

PAYMENTS OF INDIAN RUFEES 942 AND IRISH romms 683.83 DUE

IECEMBER 16 UNDER R)WER LOAN 6l8-GH HAVE NOT BEEN RECEIVED S'IDP

PLEASE CABLE STATUS REGARDS

NOT TO BE TRANSMITTE"D

.ABDI

INTBAFRAD

AUTHORIZED BY: CLEARANCES AND COPY DISTRIBUTION:

NAME Getachew Abdi, Loan Officer

DEPT. Western Africa IB

SIGNATURE ______ c..._h__,u=-=---=-P~_ve_L=.._.--u_~--~-----1

<SIGNATURE OF INDIVIDUAL AUTHORIZED TO APPROVE)

REFERENCE:

ORIGINAL (File Copy)

(IMPORTANT: See Secretaries Guide for preparing form)

cleared with and cc: Mr. Watanabe, Con troll er I s

cc: Messrs. Wright Dutt Ribi

EE GAbd.i:crm

for Use By Communications Section

Checked for Dispatch: ~-------------

.. .., ..

·· - ::.. " :.:1

,.. ...... . '

.•

., ... ...

Country

GHANA

-~-----·--Loan# 618 Credit# Investment #

Title and Description

J).e C /tf/ 7~

••

Project

Volta River Authority BUDGE!' Proposals - 1975 •

Document Date Dec• /1 2/74 Prepared By VRA •

Transmittal Letter No.

Date

'

From

( ' l . ) No Letter-Copy , 1 Card for File 0

- ---,.-

Document#

<"'J 7 ., / --.-,.,y-7--:--------.....,,_ ..... _~ .

I •

I, I

I

; I

~· : - ......;..

--

Vol.ta River A\Ithorl.ty P. O. Box M 77 Accra, Ghana

Att: Mr. E. L. Quart.ey Chief Execut:t

Dear Mr. Quartey1

December 4, 1974

Quarterg Deport ot June 301 1974

have received your let.ter dated Move r 14, 1974 enclosi:ng

a copy of your rterly leport for the per.lod ended JUl'lB JO, 1974.

In Yi of the .tull review or our June 1974 Supervision Mtssion,

have no :turther co nt on above report.

Control No o GHAVRA-4-12

cco Mr. Thi~ (WAPPB)

SAlber-Gla s etten:cs

Sincerely yours,

llen6~ Ribi Chief', Public Utilities Projects Division

lwstem Africa Regional Otf'ice

INTERNATIONAL DEVELOPMENT I INTERNATIONAL BANK FOR I ASSOCIATION RECONSTRUCTION AND DEVELOPMENT .

INTERNATIONAL FINANCE CORPORATION

OFFICE MEMORANDUM TO: Files DATE: December 3, 1974

FROM: So Alber-Glan~ten (WAPPB) C.Ja-.. '-I~"'"'~ SUBJECT: GHANA - Power - Volta River Authority Loan 618-GH

Auditor's Comments on 1973 Accounts

This note is to summarize the major points made by Coopers and

Lybrand in their comments of November 8, 197L. to VRA on Internal Controls

and in their required supplementary letter to US AID, also of November 8,

19740

The auditors state that:

(i) Accounting1 Budgetary Control and Internal Audi ting

standards are satisfactory;

(ii) System weaknesses exist in respect of the CIDA Loan

Administration, Retention Moneys and Work in Progress

Accounts; and

(iii) All independent checks carried out in respect of

Contract Expenditures and their Financing, Cash and

Bank balances, Receivables and Payables, Inventories,

Investments confirmed the accuracy of the accountso

cco Messrso Thiam (WAPPB) Munthali (WAlDB)

SAlber-Glanstaetten:cs

TO:

FROM:

SUBJECT:

INTERNATIONAL DEVELOPMENT I INTERNATIONAL BANK FOR ASSOCIATION RECONSTRUCTION AND DEVELOPMENT CORPORATION

INTERNATIONAL FINANCE ~

~!£ \ -OFFICE MEMORANDUM lL/t./14

Files '"'

S. Alber-Gl~en (WAPPB)

GHANA - Power - Volta River Authority -Progress Report April -

DATE: December 3, 1974

G-'1.~ I~ t1r1 ~

Loan 618 June 1974

This note is to present the analysis of the financial information presented in above report.

lo For the first half of 1974, VRA earned a net income of¢ 208 million (US$ 2o4 million equivalent) or about "5%, of total revenues ~o While this profitability equals the one during the same period of 1973, it is about 20% short of the level required (Loan 618-GH) to meet in 1974 the 8% return on the Government's investmento (This also confinns the latest Supervision Mission's expectations; see Back-to-Office report of July 8, 1974)0

2. The above profitability results from a combination of increases in revenues (8%), operating expenses (13%) and interest (13%) and a decrease of the depreciation charge (6 05%). The overall increases of operating expenses however would have been much higher had it not been moderated by an 18% de­crease (essentially Bank charges) of the major category, administrative ex­penseso All other expense categories increased by 26-54%. Staff and trans­portation alone accounted for increases of 14-33% and 38-74% respectivelyo Staff expense increases are due to improvements in salary and other benefits as overall staff levels increased by only 4.5% since July 19730

3. VRA's overall financial position remains strong with a current ratio of 1.9 and a debt/equity ratio of 52/48 .

2...1 This excludes interim rate increases granted by Valeo . These are accounted for in a deposit account until full agreement on future tariffs has been reached.

cc. Messrso Thiam (WAPPB) Munthali (WAlDB)

SAlber-Glanstaetten:cs

Volta River Authority P. o. Box M 77 Accra, Ghana

Att: Mr. E. L. Quartey Chief Executive

I.ear Mr. Qu.a.rtey:

December 3, 1974

Re, Audit of 1973: Accounts

We have reeeived your letter of November 19, 1973, enclosing

one copy of Coopers & Lybrandis Report dated November 8, 1974 on In­

ternal Contl'Ol, and one copy of Coopers & I;ybrand's Report dated

November 8, 1974 on the Authority's Accounts tor 1973.

We have reviewed these documents and ~e have no comments

at this time.

Control Noo GHAVRA-4-13

cc o Mr o Thiam (WA.PPB)

SAlber-Gla ~ tten:cs

S!.nitly youro,

Rene A. Bibi Chief, Public Utilities Projects Division

Western Africa Regional Office

t

l MAIL

Volt Riv thority P.O. M17

er• Gh

Re: Loan No. 618 CH Loan Service Payments Due in Various Currencies

Gentlemen:

The B~nk has recently revised its policy regarding the acquisition of

currencies due under Loans. In addition to u. S. dollars and Pounds sterling

we now are prepared to accept French francs to be used for the purchase, as

your agent, of the various currencies due under the above-mentioned Loan.

Should you wish to take advantage of this option, please sign and return to us

the copy of the enclosed form letter.

Sincerely yours,

Victor c. ai puty Controll r

Enclosure:

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

1818 R Street.N.W., Waob.ington, D. C. 20433, U.S.A .

A.a Cad. 202 . 'lllopJ.oa. -ax-.. 3-6360 · aJJ. .A.Lin .. - INTBAP:IUJ)

• 1 7

Re: Loan No. Loan Se Due in Var i ous Currencies

Gentlemen:

In accordance with Section 4.05 of the General Condi tions applicable to the Loan Agreement of the above-mentioned Loan the I nternational Bank for Reconstruction and Development will, until further noti ce, accept U.S. dollars, French francs or Pounds sterling and attempt, as your agent, to acquire the currencies actually payable to the Bank under the Loan.

In case you accept this offer for the above-ment ioned Loan, our Summary Statement of Account requesting payments in t he f uture will show the amount due in each currency and the estimated U.S. dollar, French franc or Pound sterling equivalent. Upon receipt of the dollars, francs or s t er ling, the Bank will purchase the required currencies at the best rate it can obtain at the time of purchase. Consequently, as market rates fluctuate , i t will not be possible to determine in advance the exact amount of dollars , francs or sterling requi red to purchase the currencies due to the Bank. Therefore, the amount of dollars , francs or sterling requested by the Bank may be more or less than the amount necessary to purchase the required currencies . Any minor difference will be carried forward to the next payment date. If the difference is significant the Bank will refund t he overage to you upon request or ask you to transmit the shortage to the Bank as soon as possible.

Receipt by the Bank of such dollars, francs or sterling will not constitute fulfillment by the borrower of its payment obligations under the Loan Agreement. Such payment obligations will be fulfilled only when t he Bank has acquired the necessary currencies due to the Bank. Therefore, any borrower who wishes to accept this offer must transmit the dollars, francs or s terling to the Bank at least five working days in advance of the regular payment date of the loan. This is particularly important as some of the amounts due must be paid to others who have purchased parts of loans from the Bank.

Form No. 495 (6-74

2/cont'd

Re : Loan No • 6 8 - 2 - t 7

If you wish the Bank to act as your agent in accordance with the foregoing will you please sign and return to us the enclosed copy of this letter, in­dicating whether you will use dollars, francs or sterling for that purpose.

Sincerely yours,

Enclosure

We wish to accept the above arrangement and will in the future furnish

U.S. dollars/French francs/Pounds sterling* to the International Bank for

Reconstruction and Development so that it may, as our agent, attempt to

acquire the currencies due under the above Loan and apply them to the payments

thereof.

Date By~~~...,..,.~-,---,,---~~~-,---,,~~~~ Authorized Representati ve1~

* Please ensure that the currencies not chosen are crossed out from the above authorization and the person signing is duly authorized for this purpose. Those persons authorized for signing withdrawal applications are not nec­essarily authorized for signing this type of document.

Form No. 496 (6-74)

/Dt:L

VOLTA RIVER AUTH'ORITY

P 0 . BOX M77.

ACCRA . GHANA

6/3

Cabtes VOLTA. ACCRA

Our Ref. 9-oo/ J.f Sfct;rho" ~4941

Your Ref. "7 / Date November 19, 1974

International Bank for Reconstruction & Development, 1818 H Street, N •• , ashington, D.C. 20433

Dear Sirs,

VOLTA RIVER AUTHORITY _\ ACCOUNTS AS AT J 1 ST DECEMBER 1 973 l- t LD u :,.

c- r ..,t,l ..

I have pleasure in forwarding, herewith, copies of the following documents for your information.

(i) One copy of Coopers & Lybrand ' s Report dated November 8, 1974 on Internal Control .

(ii) One copy of Coopers & Lybrand ' s report dated November 8, 1974 on the Authority ' s Accounts for 1973 addressed to the Controller, u.s. AID Mission to Ghana .

The Annual Report and audited account for 1973 have already been sent to you.

Please let me have your acknowledgment in due course.

. NOV 2 0 ·j974 Ju'i.a .t(e1: 'd. --------...----Date Ack'd. R:i_:}~---;Bsigned to -~LLt~~

' Quartey CHIEF EXECUTIVE

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AUTH RITY Cables VOLTA. ACCRA p 0 . SOX M77,

Ou, Ref. SU) frm/11-s~• 64941

Your Ref. /

The Chief, Public Utilities Projects Division, Western Africa Regional Office, I. B. R. D., 1818 H Street, N.W. Washington D.C. 20433, u.s.x.

Dear Sir,

QUARTERLY REPORT VOLTA RIVER AUTHORITY

ACCRA . GHANA

Date November 14, 1974

NOV 221974 Date Rec'd.------------

\2-~-/~ Date Aok'd. ----------

1 /

~signed to~~ ~ h, .

P./l. I forward, herew!th, a copy of the Authority's Quarterly

Report for the period ended June JO, 1974.

f

Yours truly,

I •

E.L. Quartey CHIEF EXECUTIVE

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i SUBJECT:

INTERNATIONAL DEVELOPMENT I INTERNATIONAL BANK FOR I IN TERNAT I ONAL FINANCE ASSOCIATION RECONSTRUCTION AND DEVELOPMENT CORPOR.tT!O:, •

;~>' " . ; ..... ' . . ~ r..1.A lt)...', Ua.,· 1

OFFICE MEMORANDU~j1

rt?t -,1·1_l.1'6.._._ ... ~--~ Files l s. Alber-Gl.a,J&a;tt;en (WAPPB)

GHANA - Loans 310 and 618-GH - Volta River Authority (VRA)

DATE: October 2, 1974

- Draft Amendment to the Volta River Development Act

' 1. On September 26, 1974, Ghana's Deputy Attorney General Dr. S.K.B. Asante met in our offices with Messrs. Reitter, Dutt, Nissenbaum, Abdi, Ribi and myself to respond inforrrally to the Ba.nk 's position vis-a-vis the . Government I s intention to limit the powers of VRA' s Chief Executive, as re­flected in our letter to Mr. Reitter 6f September 11.

2. Dr. Asante explained that the motive behind the proposed amend-ment to the Vol ta River Development Act was the Goverrunent ' s effort to standardi ze the statutor-.1 provisions concerning the powers of boards and chief executives of several Government corporations. Dr. Asante indicated that it was the Government's philosophy that boards should have the powers to hire and fire but that these would be delega t.ed as appropriate . How­ever, he acknowledged that the new draft provisions, if ir.:plenented, woulci involve VRA' s Board in persor.nel actions affecting lm; level s:-2.ff . It was therefore agreed that , fror.t an efficient manager:,er,t point of view, it v;ould be mor& appropriate to a thorize the Board to &.pprove pe.csunnel actions affectir.g onl~- VR.Ci. 1 s top management. ',;e suggcst9d that top mana­gement in VRA could be defined in terrr.s of posit.ion or salary as encor.:pas­sing the heads and their deputies of major departments.

3. Finally, we reiterated· our position that '\\e did not object to the draft provision that the Government ;.:ould henceforth nominate VRA ' s Chief Executive as it would only represent the forrralizatjon of actual practice .

cleared with and cc. Yi.I' . Abdi (hAlD3) cc. Eessrs. Reitter (i-:AFGA)

Dutt (Chief, '\';-Al DB) Ribi (Chief, 1,JAPPB) Thiam (\".'...4.PPB) Poncia (Legal)

SAlber-Glanstaetten:cs

'

•

•

September 20, 1974

GHANA - Loan 618GH

Dear Mr. Quartey:

We acknowledge receipt 0£ your letters dated September 6 and

September 12, 1974, enclosing respectively four copies of the Volta

Ri:ver Authority's Annual. Beport .end Accounts for the year ended

December 31, 1973, and a copy of the Volta River Authority•s Quarter]J'

Progress Report £or the period ended March 31, 1974.

are present:cy- reviewing the above mentioned documents, and

if we have any comments, we will write to you.

Mr. E. L. Quartey Chief Executive Volta River Authority P.O. Box M77 Accra, Ghma.

lmn/s

Control Nos: GHAVRA-4-9 GHAVRA-4-11

cc: Messrs. Alber (WAPPB) Thiam (WAPPB)

Sincere]J' yours,

llen6~Rl.bi Chief', Public Utilities Projects Division

Western Africa Regicmal Office

RCW l 2 J •

Distribution: URWN HL GHAA 275

ACCRA 275 / 27 1 13 1655 Date Rea'~.E!_:_~-~~~~ ~ Mr. Ribi

Sept. 13, 1974

LT

INTBAFRAD

WASHONGTONDC

Date Aok'd. JA~--~~ ~. Mr.Dutt

\ssigned to --k~ _ _/ l,t~ / ~.___

------------GHPt~~A-4-lO -------------

_J4 FOR RISI COPY NISSEBAUM REURCAB 193 SEPTEMBER

11 PRIMO VRA AWAITING URLET RE AMDNEMENTS VRA ACT

YMICH EYE TRUST HAS BEEN AIRMAILED STOP HOWEVER

DR ASANTE DEPARTING ACCRA TOMORROW AND WILL BE IN WASHINGTON

SEPTEMBER 24 FOR TEN DAYS OR SO STOP HE ENQUIRED OUR POSITION

COL t 93 11 94

AND EYE INFORMED HIM CONTENTS URCAB STOP WE AGREED

TO DISCUSS MATTER IN WASHINGTON IN MORE DETAIL STOP

SINCE ASANTE KEY FIGURE THIS APPEARS BEST SOLUTION AND

DURING HIS ABSENCE NO ACTION ON ISSUE ENVISAGED ANYWAY

STOP INFORMED QUARTEY YOUR SCHEDULE AND SUGGESTED POSTPONEMENT

HIS VISIT WASHINGTON BUT THIS IS NO T

POSSIBLE STOP HIS MEET! lGS WITH CHAUFOUR !ER AND

THAL . ITZ WHICH HE REQUESTED THUS O LY GENERAL

REV IE STOP HILE HI ACCRA IT MIGHT BE USEFUL FOR YOU TO

l"EET 1 ITH KALITSI IF YOU CAN ARRANGE IT STOP HE KNO S OF YOUR

VISIT SEGU• DOG SC TIMING YOUR VISIT ACCEPTABLE STOP

PLEASE CABLE

JNOO - QUARCOO DIRECTLY DATE AND TIME ARRIVAL SINCE EYE

DEPART ACCRA SEPTEMNER 20 STOP RETENTION COOK UPTO NINE

~DNTHS UNDER PROPOSED ARRANGEME TS SUGGESTED BY ODA AND BAK

AGREEABLE TO GWSC STOP ODA REPRESENTATIVE HERE AND G C NO

~ORKI~G our PARTICULARS STOP GISC HAS ALREADY APPROACHED

CANADIAN HIGH COMMISSION FOR COOK REPLACEMENT

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AND CANADIANS FAVOURABLE DISPOSED TO PROVIDE AND FINANCE

SUITABLE PERSON TERTIO TELECOMMUNICATIONS WILL INFORM

PANDT YOUR VISIT NEXT WEEK AFTER EYE OBTAIN MOST OF THE

!~FORMATION REQUESTED BY MISSION STOP HAVE MADDDE SOME

VROGRESS IN THIS RESPECT STOP MINISTRY OF PLANNINGAND

0 ANDT HAVE INDICATED READINESS FOR REAPRAISAL MISSION

OCTOBER

.J BUT YE WILL CONFIRM THIS NEXT WEEK STOP YOUR VISIT

THUS TIMELY PARTICULARLY IF MISSION SCHEDULED ENDOCTOBER

REGARDS

REITTER

VOLTA RliVER AUT~ORITY

Cables VOLTA. ACCRA

Our Ref Sb1100,; 1i,/ci,"e ~4941

YourR~ P / 1/ The Chief', Public Utilities Projects Division, Western Africa Regional Office, I. B. R. D., 1818 H Street, N.W. Washington D.C. 20433, u.s.A.

Dear Sir,

P 0 . BOX M77.

ACCRA . GHANA

Date. Septeaber 12, 197~.

jl:P ~ U 1974 ;c11.e .kea 'a.. -----------

Jate Ack'd. ~].Q..~/~

·ssigned to ~~l~

-----------QUARTERLY REPORT

\ f>.~ ' VOLTA RIVER AurHORITY l\.~

/ I forward., herewith, a. oopy ef the Authority's Quarter'.q Report for the period ended 31st March, 1974.

!!.2!.•

Youra truly,

E.L. Quartey CHIEF EXECUTIVE

R E C E I'.' E. [.J

!971.iSEP 20 A II: 0

C O MM UN IC/, : ! ll · :, SECTII ··

Form No. 27 (3-70)

INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR INTERNATIONAL FINANCE

RECONSTRUCTION AND DEVELOPMENT CORPORATION

TO:

COUNTRY:

TEXT: Cable No.:

REITTER

INTBAFRAD

ACCRA

GHANA

/1J

OUTGOING WIRE

DATE:

CLASS OF

SERVICE:

September 11, 1974

L~.rr: PRIMO REURCAB 143 CONCERNING AMENIMENT VOLTA RIVER DEVELOPMENT

ACT STOP BANK HAS NO OBJECTION BUT RESERVATIONS IN RESPECT OF

NEW SECTION 8 STOP LETTER FOLLOWS WHICH WE HOPE SPRAGUE WILL

DELIVER THIS WEEKEND STOP SECUNDO REURCAB 150 AM PLANNING TRIP

SIERRA LEONE GHANA NIGERIA EARLY OCTOBER THEREFORE WOULD Nar BE

AVAILABLE FOR MEETINGS QUARTEY STOP SUOOEST INVESTIGA.TE WHETHER

VISIT COULD i=; BE POSTPONED AFI'ER OCTOBER 20 STOP TERTIO PLANNING

ABOur FOUR DAY VISIT WEEK OCTOBER 7 GHANA WITH BUKY PURPOSE ALPHA

INTRODUCTION BUKY WHO RECENTLY JOINED DIVISION BETA REVIEW CURRENT

P:OOBLEMS GWSC GAMMA. PREPARATION REAPPRAISAL TELECOM PROJECT STOP

PLEASE ADVISE WHETHER VISIT AND TIMING CONVENIENT

REGARDS

NOT TO BE TRANSMITTED

RIBI I:NTBAF:BAD

AUTHORIZED BY: CLEARA NCES A ND COPY DISTRI BUTION:

NAME R. Ao Ribi (Chief, WAPPB)

DEPT. Africa "Public Utilities"

CSIGNATU F NDIV I DUA L AU THOR I Z ED TO APPROV E )

REFERENCE: SAlber-1..uao..w..:>-1Jaetten/RRibi:os GHAVRA-4-8 GHANA VOLTA RIVER 618-GHA

ORIGINAL (File Copy)

(IM PO RTANT: See Secretaries Guide for preparing form)

cleared with and cco Mr. Nissenbawn (WAlDB) Mr. Poncia (Legal), only prime

cco Mro Buky (WAPPB) Mr. Thiam (WA.PPB)

For Use By Commu nications Section

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VOLTA RIIVER AUTH'ORITY

P 0 . BOX M77.

ACCRA . GHANA

Date 9th September, 1974.

Chief , Public Ut ilities Project Division, Western African Regional Office , 1818 II. Street , N. W., .-iashington D. C. 20433 . U.S.A.

Ge.r~lemen,

V. R. A. Al!NUA;, l!Zf.ORT FOR 19/~ '1• pleasure i n forwarding , herewith , four (4) copies We have

of the Volta River Authority' s .Annual Report and Accounts for the

year ended 31st December , 1973 , for your information and records .

Yours faithfully,

:C . L Qu~tey CHIEF .cl.XECUTIVE

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Cables VOLTA, ACCRA

Our Ref r;t,tjcraz. I ·w~"" ~4941

Your Ref. 7

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Mr. 1 ene ·• Ribi, Chief .Public Utilities Project Division, International Bank for Reconstruction and Development, Western Africa Regional Office, 1818 H. Street, N.W. Washington D.C. 20433, U.S.A.

Dear Sir,

V.R • • ANNUAL REPORT FQft 1973

PO. BOX M77.

ACCRA . GHANA

Date 6th September, 1974.

I have pleasure in forwar,.'hg, herewith , 4 copies of the

Volta River Authority 's .Annual Report and Accounts for the year

ended 31st December, 1973, for your informution and records.

Yours truly,

SEP 1 r 1974 0 '" -----·-··-· -

~. (> P,nt 1 () ( -....y D o 'd·-fn~T- ro1Z_

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September 5, 1974

GHANA - Loan-618-GH Financing of Resettlement Unit

Dear Mro Quartey:

This is in reply to your letter of August 8, in which you requested our concurrence to your proposal of charging ex­penses, related to VRA's residual resettlement activities, to power revenues.

We have no objection to your proposal in view of its negligible incidence on the finances of VRA's power operations. We would however .suggest that resettlement be shown separately in your revenue accounts, since some resettlement activity will most likely continue with VRA's future hydroelectric programs.

Sincere~•,

John a.~ Acting Chief,

Public Utilities Projects Division Western Africa Regional Office

E. L. Quartey Chief Executive Vol ta River Authority P. o. Box M 77 Accra, Ghana

cco Messrs. P. Reitter (WAPMG) R. Ribi (Chief, WAPPB) Bo Thi.am (WAPPB)

. H. Nissenba um (WAlDB)

SAlber-_l\ ~.- tten:cs Control ~VRA-4-7

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August 29' 1974

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VOLTA RIVER AUT.HORITY

Cables VOL TA, ACCRA

Our Ref 9-3J/~1'1lone 64941

Your Ref

P. 0 . BOX M77.

ACCRA . GHANA

Mr. Rene A. Ribi, Chief, Public Utilities Project Div., Western African Regional Office, International !ank for Reconstruction

end Development, 1 818 H Street, N.w., Washill!ton D.c. 20433

Dear Sir, -----------FINANCIID OF RESETTLEMENT UNIT

I wish to bring to your attention that the main resettle• ment work which was previous]3 uniertaken by the Authority with furda provided by the Central GoveI'Illllent had since Ju]3 1972 been transferred to the appropriate Goverlllllent Departments.

However, there is still a need to maintain a small adminis­trative unit within the Authority to take charge or residual .serrleea such as finalisation ani preservation of resettlement records, such as source documents, attending to petitions and queries affecting the subject matter of resettlement, co-ordinating with various goyerimental agencies in la.nd acquisition and conveyancing of properties aDi control of developrtents in resettlement centres. This office will serve as a monitoring unit, am through its a.n&]3sis o'f resettlement problems, will be able to exert some controlling inf'luence on the agencies currently involved in the resettlement work, and thus maintain the continuity of the resettlement work as originally programmed.

For the calendar year 1974 it has been estimated that it will cost the Authority an amount of t70,000 to finance such a unit. This cost is considered a fair charge on power and we are therefore requestin« your oonourrence for it to be charged to power revenue.

oc: Peter Reitter, Resident Representative, I. B. R. D., C/o Guardian Royal Exchange Assurance Building, Accra.

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Mr. E. L. Qu.artey Chi et Ex:ecuti ve Vol.ta River Authority P.O. Box M 77 Accra Ghana

July 15, 1974

GHANA - Loan 618 Annual Report for 1973

Dear Mr. Quart~,

We thank you for your l.etter of June 28, 1974 and the

attached copy o:f Vol ta River Authori tyt s Annual Report and Accounts

for the year ending 31 at Decanber 197 3.

GHANAWA-4-6 /hm cc. Mr. Alber (W'Ai'PB)

at-~.,.,,a. w.1..1.1.eer~ ours,

7 '

Jo avis Deputy Chief, Public Utilities Projects Division

Westel"n Africa Regional Office

TO:

FROM: .

SUBJECT:

INTE RNATIO'.JAL DEVELOPl/,EIH I INT [F/!,Al lON.;L BMIK FOR . I INT!: RN/.TIO'lAL FINI.NCE ASSOC IATI ON RECONSTRUCTIOII /,@ DEVELOPl~P.D CORPORATIONi' J i /

c r - yA,0.)J .. a... - ~ ~ f t:i ~~d.- ,

l, OFFICE /v'\Etv\ORA~Q~~~ _ (iw0l $v-L-

Y.r. J • ·cY! tis ( Deputy Chief'; WJ.P?B) " ~::~ :';:'n :, t:I~-ucfri g S. Alborlbt~:etten and B.~arn (WAPPB) (r ,-- 0 I ,

GHANA - P~wer (i) Su :irvision Mission: a Electricity Corporation of Gha:aa (ECG),Cr.256-GH

(b) Volta River Authority (VRA), Loan 618-GH

(ii) Prea:onraisal Mission: ECG's Distribution and VRA's Power Generation R.v.pansion Projects

Back-to-0 .ffice RDport

1. In acco::'.'.'dance with our Te:rms of Reference of J~"1e 13, 1974, . '\Je visited Accra frc-.m June 17 to 28. Hr. Ribi (Chief, WAPPB) joined the mission frD-11 ,June 20 to 28. The main discussions were h~ld in full coordination with· our Resident Representative, Hr. P. Reitter. No im.~ediate action is required.

2. The missioa 's findings are Slli'1Ull.arized below. Detailed final Super'7is ion Reports will be issued shortly. Sho1Jld an apprai~al of ECG 1 s next expansion phase take place in late 1971.i (see para. 6), it is proposed to include th0 Canpletion Report mate:..·ial on Credit 2.56- GH in the rie H a!-lµraistl report; othen..-ise a combincc.i Canpletion Rep or;, en Credit, 2.56-GH a.'11 Loan 618-GH would be issued in early 1975.

FINAL SUPERVISIO}l

ECG - Credit 256-GH

3. ECG 1 s 1971-1973 expansion phase is practically c~11plete; this is ab rut six nonths behind schedule. Final total cos::. is exoected to be about US$ 16-17 million equivalent which is about 12-17 percent higher than that estimated dU1·ing app!'aisal. 'The foraign exchange shortfall c:i

Credit 256-GH is now est:inate d at about US$-6oO,OOO and will be met fro."'!l Ghana 1 s mm foreign exchar..ee resources. In 1973, ECG 1 s sales reS'l.uneci normal grom:,h of about 11 percent, recovering frcr.i the growth slowdown of 5 percent in 1972. T}:l~ _rate of return achieved in 1973 was 7 .3 percent. Although this is loiier than t:ie 8 percent stipulated under the Credit Agree..'lleut, it may be considered satisfactory. During 197h, the current financial year, ECG expects to retain a rGasonably good fin~1cial position, but the rate of return is likely to fall to 4-5 percent. As the fin211cial position :i.s expected to deteriorate sharply in 1975', ECG is presently renewing its request to the Gov8rnm ent for tariff increases . F.DG e.xpects to finally fill the post of Chief Engineer by tha end of 1974. ECG I s Ha11aging Director is due for retirement this year; however, the Government may request an 9.xtension of his services.

. ,.,

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-· Mr. J. G. Davis - 2 - July 8, 1974

VRA - Loan 618-GH

4. The Bank project, c msisting 1 .. qinly of the completion of the . Volta River Project, was finished essentially or, t .ime; however, sane substation equipmsnt will be instilled by thG end of 1974. Estimat.ed project costsare expected to be about US$ 16-17 million or abc1t 12-17 percent higher than estjmated during appraisal. The foreign exchange shortfall on Loan 618-GH is about US$ 400,000 ru1d has been met out of Ghana's mm resources .. As of December 1973, VRA's financial position uas satisfactory and for the s econd consecutive year, dividends were paid to the Government. In 1974, its first test yea:r on the rate of return covenant, VRA is likely to achieve only a return of about 5 per­cent, instead of the required 8 percent. Before increasine tariffs, VRA is awaiting the recc:r,1mendations of the oneoing study by Shawmont (Canada ) on power charges to its major customer, the Volta Aluminum. Co.111pany (V ALCO) , a."ld the results of its subsequent negotiations ui th V.ALCO. Sha~ont 1 s recanmendations are expected by the end of 1974.

5. The Government has prepared draft legislation to empower the Governnent, rather tha.~ VRA's Board, to nominate VRA's Chief Executive and to E;:mpower VRA 1 s Board, rather t,han VRA 1s Chief Executive, to hire and fire senior staff. Under Loans 310 and 618 amencbents to the Volta River Authority Act are subject to the Barll,c I s approval. The Goyern:nent is now approaching the Ba.'1k and other financing agencies involved (e.g. USAID) to receive infonnally their respective views on these matters. Th:Ls Division I s position will be presented in a separate i;1e;norandum, to be issued shod,ly •

. PREAPPRAISAL

ECG Tnird Distriuution Phase

6. ECG 1 s consultants, Labrneyer (G ermany), have CCi!lpleted their study of ECG I s lov voltage requirements for the period of 197 5-1977. The study is now under consideration by ECG 's Ma~ag~nent and Board. In addition, ECG is presently considering several _new requests for additional power from camnercial concerns. A proposed Bank project may cover facilities required to meet above power request and possibly a tranche of the Government 's Rural Electrification Program in addition to the re(!Uirements identified by Lahmeyer. ECG indicated that all project d6cumentation will be availa-

·b1e· by August 1974. The co~~ .of such a package of works is likely to be about ¢ 10-ll million (US$ 9-10 million equivalent), with about 8o percent in foreign exchange. In view of the wodcrate size of the project, the &l.nk and ECG Hill have to agree before appraisal ..rhether a project should not cover ECG I s require:nents over four years rat.her than three. In any event, the project is likely to be ready for appraisal by l~tc 1974. The main issues are lil:ely to be the adequacy of EX;G I s tariffs (see para. 3) and the -possibility of reserved procur~~ent. (ECG has a preferential agreement with a Goverrnent-owned firm (Kabel.metal) for the supply of items which will be required for the Project.) .

.:

Mr. J. G. Davis - 3 - July 8, 197Li

~ - KpoP~~ Hydroelectric Scheme

7. The Kpong hydroplant (188 Hvl) i~ likely to be the main item · of the next Bank operation with VRA, now planned for FY77. The scheme would utilize the flow of the Volta River regulated by the Akosambo reservoir over about 12 of last 15 m of head available between the tail­water of the .Akqombo plant and the sea level. Project costs at 1974 prices,including contingencies allowances in accordance with the latest Bank guidelines, are ·likely to amount to a.bout US$ 140 million (for the

·· assumed t:imetable see para. 8 below).

8. Under CIDA fina..'1.cing, P.cres (Canada) is prep_aring the feasi-bility study for th8 plr-.,."1t; the study will :L.'1.clude a present cost ccrnparison of a thennal 2...l ternative. The irr..restigation of the irrigc.tion aspects of the Kp ong plc.nt will be added to Acres terms of reference. The study will be ccriunenced in mid-July 1974 and is expected to be completed by April 1975. VRA plans to have Acres:...-again with CIDA financing--·ccntinue project preparation ~p to the tendering stage; this cculd be ccrnplcted by about the end of 1975. · On this basis, the first contract (civil works) . could be expected to be awarded during the third quarter of 1976. A Bank appraisal could be planned for mid/end 1975.

9. The main project issues are likely to be VRA rs tariffs ( to VJ>iCO and other clients) and the econcmic justification to meet the assuned load growth. The analysis of the latter ( for which the Acres and Sha....::rnont studies, mentioned in paras. 4 and 8 aboYe, are ex;_:iccted to provide basic infon-:iation) is likely to require substomtial Bank stccff input, particularly frcm Public Utilities, Agriculture, and Industrial Projects. We propose that by early-August, WAPPB prepare a plan for carrying out this economic analysis.

SAlber-Glanstaetten:cs

cleared in substance with Mr. Ribi (Chief, El\.PPB) cc. Hessrs. Thalwitz (Director, HAP)

,,

Pouliquen (Assistant Director, 1-lAP) Rowe (Assistant Director, WAP) King (Assistant to the Director, Wright (Director, 1JAl) Dutt (Chief, hAlDB) fu.tes (WAPPB) lfo'wi cld. (OED) Reitter (Res. Rep. WAFGA) Mirza (Chief, . \·.'AFNG)

WAP) Nissenbaurn (HAlDB) Wyss (Chief, \il\.l<,·lA) van der Tak (Directo~ PAS) P~vani (Director, PPB) (3) Bowron (P&B) Po:icia (Legal) Kanachanalak (CPS)

TO:

FROM:

SUBJECT:

INTERNATIONAL DEVELOPMENT I l"TERNA'IONAL J,~ ,-,:::,o::: , : AN ~ ASSOCIATION RECONSTRUCTION AND DEVELOPMENT CORPORATION

OFFICE MEMORANDUM~c~ II J Mr. H.J. Nissenbaum

Peter Reitter

DATE: July 3, 1974

Letter No.62

Ghana - Proposed Amendment of Volta River Development Act

On June 28, 1974, the Solicitor-General, Dr. S.K.B. Asante, called Mr. Haven North, U.S.A.I.D. Director, and myself to a meeting in his office in order to inform us about a proposed amendment of the Volta River Develop­ment Act regarding the appointment and powers of the Chief Executive of VRA. Dr. Asante explained that since any amendments to the Act required the consent of the participating agencies and parties to the Volta River Project, the Ghana Government, before approaching the respective agencies officially, wanted to consult with them informally first in order to obtain their reactions on the proposed amendments.

Dr. Asante handed us the attached papers which are self-explanatory. The rationale for the proposed amendment is stated in the attached letter from the office of the NRC to the Attorney General's Office dated May 30, 1974. Dr. Asante said that the proposed appointment of the Chief Executive by the Government, i.e. the National Redemption Council, as well as the determination of the terms and conditions of his appointment by the NRC was in keeping with the general policy of the Government to have full control of the appointments of heads and chief executives of all government statutory corporations. VRA was the only institution where the appointment of the Chief Executive was the prero­gative of the Board and not the Government. The proposed amendment reverses the Volta River Authority Act (Amendment) Decree NLCD 268 of 1968 which had vested the appointment of the Chief Executive into the Authority, i.e. he was nominated by the National Liberation Council and appointed by the Authority on such terms and conditions as the Authority may determine. Under the original Act of 1961 he was appointed by the President of the Republic.

Dr. Asante felt that since the respective lending agencies had accepted the original Act of 1961 and the appointment of the Chief Executive by the Head of State, they should have no difficulties in giving their consent to this arrangement.

Concerning the appointment and dismissal of the senior staff of the Authority which is to become the responsibility of the Board and not the Chief Executive, Dr. Asante pointed out that this was again in line with the Govern­ment's policy that the head of any statutory corporation should not be the sole authority to appoint or dismiss senior staff. In the original Act and in the Amendment Decree NLCD 268, the Chief Executive had full authority to hire and fire all staff, subject to the general policy laid down by the Board. Dr. Asante also said that the curtailment of powers of the Chief Executive of VRA in this respect was in no way directed towards the person presently holding this office. The proposed Decree in fact explicitly confirmed him in this position. It was simply the Government's position that no top executive should have unlimited powers concerning the appointment or dismissal of senior staff. In all other statutory corporations, their heads had only power to appoint or dismiss staff of a certain level, and the special status of the Chief Executive of VRA appeared to the Government unwarranted.

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Mr. North and I undertook to bring the matter to the attention of U.S.A.I.D. and the Bank respectively and to advise Dr. Asante informally as he had requested on the respective reaction or position by Washington. In line with this arrangement, I would suggest that the Bank communicate its comments or reactions to me so that I can pass them on to Dr. Asante.

In reviewing the respective provisions in the Loan Agreement (GH 618) between the Bank and VRA dated June 23, 1969, I pointed out to Dr. Asante that in my opinion the proposed appointment of the Chief Executive by the NRC would abrogate Section 5.10b, according to which "the Borrower shall obtain the approval of the Bank to any proposed appointment to the position of Chief Executive of the Borrower prior to the making of such appointment", the Borrower being the Authority and not the Government. Dr. Asante agreed with me on this point and felt that an amendment of the Loan and Guarantee Agreements GH 618 was called for in order to safeguard the interests of the Bank. The point I raised in this connection was whether the Government as distinct from the Authority would in fact accept the same or a similar covenant as Section 5.lO(b) stipulating prior Bank approval of any appointment which constituted a fairly far-reaching intervention on the part of the Bank. Dr. Asante stated that he did not feel this would present any problems to the Government.

While this may be Dr. Asante's personal opinion, I am not so sure his judgment on this point is right. I could well imagine that the NRC may find a management covenant going as far as Section 5.lO(b) unacceptable on the grounds that it constitutes an unwarranted interference with the powers and authority of a sovereign Government. This is also Rene Ribi's belief. Unless we over­looked it, there is no provision for prior approval by or consultation with the Bank in the Loan and Guarantee Agreements of the first loan to VRA in 1962 (310-GH) when the appointment of the Chief Executive was the prerogative of the President of the Republic. We should, therefore, not rule out government pressure to change the present management covenant into a consultation clause similar to that in the recent GWSC agreements. The only question, in my mind, is whether the Government will reopen the issue in connection with the proposed amendment of the VRA Act or in the subsequent loan for Kpong, assuming it will materialise.

While I see no major difficulty on our part with the authority of appointing and determining the terms and conditions of VRA's Chief Executive reverting back to the Government, I am somewhat concerned about the amendment regarding the hiring and firing of senior staff. Mr. Ribi agrees with me. What is not clear to me is why the Chief Executive's authority to hire and fire senior staff has been singled out in limiting his powers. Mr. Quartey tells me that he has never exercised his powers in this respect and has always referred all matters concerning senior staff to the Board. I am checking, just as a matter of interest, whether the heads of other statutory corporations are subject to the same limitations in their powers. The question which worries Mr. Ribi and myself is whether this whole matter is but a first step towards vesting more power in the Board of Directors of VRA and in increasing the influence which the Government may wish to exercise over the Authority. All this is very difficult to judge at the moment. There are no indications that the initiative for the amendment came from members of the Board even though it is known that the Chairman, Professor Bentsi-Enchill,and Mr. Quartey do not see eye to eye on many issues.

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Another question is whether the proposed amendments to the Volta River Authority Act are in fact directed against Mr. Quartey personally. On the surface of it I would rule it out. On the other hand, Mr. Quartey has been somewhat of an irritant to some members of the NRC and collllllissioners. Early this year, for example, the then Collllllissioner for Works and Housing had tabled a motion to the Government to put VRA under the jurisdiction and control of his Ministry like ECG and GWSC. There were no substantive or policy reasons for this move. What irritated the Collllllissioner and others were Mr. Quartey's quarrels over the issue of the executive chalet and the VRA yacht at Akosombo by collllllissioners and others. The motion to deprive VRA of its autonomy failed on account of personal interventions by Dr. Fordwor, and the new Collllllissioner for Works and Housing, Col. Kotei. While the presently proposed amendment of the Act may be perfectly consistent with the Government's policy concerning all government institutions and corporations as Dr. Asante claims, I would not rule out personal considerations as well. In 1972 or 1973, VRA dismissed an ex-military employee and the issue was escalated right up to the NRC and the Chairman. The dismissal, incidentally, had been approved by VRA's board.

As can be expected, Mr. Quartey does not take the Government's proposal very kindly. He himself considers the matter as yet another attempt to under­mine the Authority's independence and autonomy which he considers vital for its success. Efforts to this effect go back to the NLC, and particularly the Busia governments. He is now resigned to the fact that it is futile to stem the tide any longer and he is seriously considering his resignation in a year or so. Whether these intentions are genuine or not is again difficult to judge but they may be more serious than before. Mr. Quartey's heir apparent is Mr. Kalitsi whom he considers as his most capable man but who, in his view, would not with­stand the outside pressures and interference in the affairs of the Authority.

Even if we have grounds for concern, I personally do not think that we can seriously object against the Government's proposed amendments. However, we would certainly need to keep a watchful eye on all further developments concerning VRA. I will send you a follow-up note in the next few days on the powers and authorities of the heads of some other important and relevant government corpora­tions.

VOLTA RIVER AUTH"ORITY

P 0 . BOX M77.

ACCRA . GHANA

Date. June 28, 1974 .

International Bank 1 o.::' Recunstruction and ...:.eve J opm c>nt , Depa1:tnent of Te chnical Operations , Public utilities Division, 1818 H S trees , N • . { . , Nashington D.C. 20433 .

Gentle·nen ,

VOLU RIVE.~ AIJTHO>Ul'Y J\ ;\ n Vp,i,) r ANNUAL 'PORT .!!'OR 1973 "

,le have pleasure in l' orwarding, he(.wi th, a copy of the Volta River Authority's l\.nnual cteport and, ccounts for the year ended 31st December, 1973, for your inf'ormation .

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Printed copies o.i:' che re1,ort will be forwarded to you in due course .

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Mr. E. L. Qu.artey Chief Executive Volta River Authority P.O. Box M 77 Accra, Ghana

Dear Mr. Qu.artey,

May 15, 1974

GHANA ... Loan 618 Qllarterly Report

We acknowledge, with thanks, receipt of a copy of the Authority's

Quarterly Report for the period ended December 31, 1973. We have no

connnent on this document.

GHANA -4-5

BTh~:jc cc: Miss Lo Lerubelson

Since~ yours,

Ren~ A. Ribi Chief, Public Utilities Projects Division

Western Africa Regional Office

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VOLTA RIVER ACTTH'ORITY

The Chief, Public Utilities Projects Division, Western Africa Regional Office , I. B. R.D., 1818 H Street, N.W. Washington D.C. 20433 U. S. A.

Dear Sir,

V~ ta River Authority /

P 0 . BOX M77.

ACCRA . GHANA

Date 4th April, 1974.

I forward, herewith , a copy of the Authority's Quarterly

Report for the period ended 31st December, 1973.

i>at.e .Rea•af ~-~-15 1974 --------EncL Date Ack'd. _I'-:i_~-!_~

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coMMUN\CAT\ONS SECT\ON

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P 0 . BOX M77.

ACCRA . GHANA

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Date 6th Febr uary , 1974 Your Ref

Date

Dat e

International Ban.~ for Reconstruction and Development ,

1818 H. Street N.~ ., Washington D.C. 20433 , U.S.A.

f' Dear Sir , ~ ~{ ("

Enclosed herewit{is a letter dated 28th J anuary , 1974 from

Coopers & Lybrand , our external auditors , on the subject of internal

controls required in our Data processing work. Ve are proceeding to

study the Auditors ' suggestions for implementation.

FE B t 9 ·1~74 Rec'%;-~ -~ ;\-Qq. Ack'd. --------- - - -

Encl.

Yours truly

~ ~ .~-for Chief Executive

.is .A.K. Kali tsi

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Dr . E. L. }Jartey Chief :.xecutive Vo;.ta }ct.ver Au·hority P . Ci . J;o;: ~. 77 ,·.ccra, r:1.~,na

• January 29, 1974

r'.E-!: Lo,m !~os. J10 rm ''· 61[3 GH

:,e r(•fer to ycur lctt.er Ho. 231/124 dated J::muary 16, 1974 requestin~~ .cimo!"t.i~:-1tion r- chcdul, fJ bJ' currc11cy on the abo·ve loans .

··1e reco~ize the probluns t.hat the current T!lar'wt rate fluctuations have cvust::d. lio;,{!,.rer, ,:c re sorry th:it we are unable to comply with your request for tb· rea~jons st."ted :i.n our l0tt.er of Dt:.·cer.ibe:r 3, 1973. i:ith the recent cpprt::ciat.J.on o.:' ti~e value of the> U.S. <lollJ.r, rela·0ivc to the other currer.cie.s, we hope that the problems you mem~ioned in ym1r letter of November 8, 1973 are easing.

cc: Messrs. :rutland/Gray, J.liott

RKenney/enh

Sincerely yours,

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1faltcr C. P . l.cut,land Chi<>f, ccountirw DiviQion

Controller 1a u~partmtnt

Mro Eo Lo Quartey January 24, 1974 Chief Executive Volta. River A~thority P o. Box M 77 Accra., GHANA

Dear Mre Quartey:

Re: GHANA ... Loan 618 Quarterly P..eport

We acknowledge receipt of your letter dated December 18, 1973.,

enclosing a copy of the Volta Ri.ver Authority! Quarterly Report for the

period ended 30th September, 19730

We have reviewed the above mentioned document and have no

comments at this time.

Control Noo GHA-3-179

cc., Miss Lo Leibelson (WAPPB)

Alber-Glani~en:cs

Sincerely yours,

Rene A. Ribi

(for) Juergen Krombach, Chief Pu.blic Utilities Project Di.vision West Africa Regional Office

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Form No. 27 (3-70)

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INTERNATIONAL DEVELOPMENT

ASSOCIATION

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION

OUTGOING WIRE

TO: QUARTEY DATE: 1/18/74 VOLTA RIVER AUTHORITY ACCRA CLASS OF

SERVICE: FR

COUNTRY: GHANA

TEXT: Cable No.:

AUTHORIZED BY:

FOLLOWING CLARIFICATIONS OBTAINED IN YOUR LETTER OF JANUARY 4 COMMA

1973 AND MR. NISSENBAUM'S VISIT WE HEREBY INFORM YOU THAT UNDER SECTION

SIX POINT ZERO ONE D OF LOAN AGREEMENT 618 OF JUNE 23 COMMA 1969

BETWEEN THE VOLTA RIVER AUTHORITY AND THE BANK WE HAVE NO OBJECTION

TO YOUR MEMORANDUM OF AGREEMENT WITH VOLTA ALUMINUM COMPANY ON THE

INTERIM POWER RATE INCREASE ENCLOSED WITH YOUR LETTER OF OCTOBER 18

COMMA 1973 STOP REGARDS

E. PETER WRIGHT INTBAFRAD

NOT TO BE TRANSMITTED

CLEARANCES AND COPY DISTRIBUTION:

NAME E, Peter Wright cleared and cc: Messrs Krombach

Poncia Nissenbawn Ribi DEPT. W,

Thiam cc: Reitter

REFERENCE: For Use By

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Oar A41f. 9-3 / / I 'r-"j·' Your He1. Date 16t h J anuary, 1974

Mr. D.','I o Gray , Deputy Chief , Account i ng Division, Controller's Department , I.B.~.D., 1818 H Street , rr.w. , !ashi~9~~~-~!~~-=~~22 U.S oA ..

Dear Sir,

Ra: Loans no. 310 GH &_618 _G-H

Vie refer to your letter of 3rd December, 1 973 dealing wi -th

our request for a;nortisation schedules by curren~y .

1Ve a:ppreciate the fact that the Bank' s standard practice is

to recall, as convenient to the Bank , any one principal repayment,

wholly or partially, in any of the currencies outstanding unier a risht,

on ea.ch p ,, .. y:ier~t occasion, to specify the portion of the loan pa.y:-1,ble to

:my p:irticular currency. However, with exchange rates fluctuating

viol0.ntly, ti:'..e Ba.T"Jk' s exorcise of this right does nave a disturbi:rg

effer,t on our fin:'l.ncies, b3causP. v;e are u..11£.blc to forecast in any

retlistic ma..-mer the cost of our 9I"incipal and interest payments . If ,

~pa.rt fro:n the norm::i.l d-Lt'ficulty of anticipating exchanE;e rates , vre

find we also do not know how much falls due for payment in each currency,

forecasting is rendered impossible .

~~econd.ly, in the case of VRA, the Bank has ~xercised its right

in sucn a ·.1ay as to inc:i.·ease signif':i.cantl,y the cost to the Authority of

the pa.y ,,en ·,; s ll.ue.. This has resulted :n a., una::1ticipated burden being

placed on the Authority.

J.n the light of above rre would like to renew our req_uest of

November 8, 197 3, for you to furnish us vri th the amortisation

schedules oy curl:ency for the loans nunbered above .

We i'd.11 appreoiata your early responseo

Yours truly, /'i

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Cables VOLTA. ACCRA

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Mr. H.J. Nissenbaum, Western Africa Region,

P 0 . BOX M77,

ACCRA . GHANA

Date 4th ,Jan1:1.?rY.L· , 1974

International Bank for Reconstruction & Development, 1818 H Street, WASHINGTON D.C. 20433.

Dear Mr. Nissenbaum,

I acknowledge receipt of your letter dated 13th December, 1973, and thank you for your comments. With respect to the points in the Memorandum of Agreement which your letter considers ambiguous, our comments are as follows:-

First, as to whether VALCO would make any additional payment to us in respect of the third double-circuit line, we wish to confirm that no such provision exists in the Memorandum of Agreement. We appreciate that the third double-circuit line would provide greater security for the power supply for VALCO, for which reason it would be equitable if VALCO paid a higher tariff to reflect the additional cost to be borne by the Authority. We therefore expect that the Consultant to be appointed to review the VALCO power rate will take into consi­deration the additional investment in the third double-circuit line before recommending a new power rate. We would like to point out that VALCO is not, in fact, paying any money towards the cost of the construction of the third double-circuit line; it is only in the event of the two parties failing to reach agreement on a permanent power rate that the interim payments by VALCO will then be treated as an advance towards the cost of construction of this third double-circuit line.

With regard to your question as to why the proceeds from the interim power rate have been limited to $1,950,000, we wish to advise that we tried to relate the amount to the cost and estimated time of completion of the third double-circuit line. Furthermore, that amount is the level to which VALCO felt it could go without running into difficulties over its loan conditions, etc.

On your query as to why Article 3(F) of the Memorandum of Agreement treats any difference between the interim power rate and the new permanent contract rate, if any, as a refundable advance towards the cost of construction of the third double­circuit line, we would like to point out that this is the result of the interim nature of the rate increase agreed upon as stated in the document under discussion. In the nature of things, it is logical to hold the amount refundable unless a permanent rate is agreed upon, after consideration of the Cnnsultantl s report and further negotiations. If no agreement is reached on a permanent power rate increase, then the sum to a limit of $1.95 million paid to the VRA by VALCO will be treated as an advance to the Authority, and considered as having been applied in the meantime to the construction of the third double-circuit line from Akosombo to Terna. Thus, the situation is that the VRA refunds, if no agreement is reached, or an agreement is reached but on a price lower than 3.125 U.S. mills/kW-hr. On the other hand, VALCO makes additional payments to the VRA if the price agreed to is higher than the interim rate.

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1974 JAH \ 2 tm s: 23

CQMMUNlCATIONS SECT\ON

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We would have liked the interim price of 3.125 U.S. mills/kW-hr. to have been a non-reversible price, like we achieved when the rate was increased from 2.625 U.S. mills to 2.75 U.S. mills, but we were unable to reach agreement with VALCO along those lines. As you rightly pointed out, the Consultant's report will not be binding on either VALCO or the Authority, but we are of the opinion that it can, and will, serve as the basis of negotiations. In the context of the interim nature of the price increase, and also the procedures agreed upon in achieving a permanent power rate, it is our view that one cannot fairly, accurately and properly state that either of the parties has a veto power. In all our negotiations with VALCO for a new permanent contract rate it has been our wish to endeavour to reach an expeditious and harmonious agreement satisfactory to both sides, considering the apparent permanent nature of the original agreement. We believe we have not granted VALCO any veto powers, and that we do not stand to lose by this Agreement. We think we have established a principle that the VALCO power rate is subject to review.

We are aware of our obligations under Section (5.09) of loan agreement 618 GH to make an 8% return on the Ghana Government equity, and steps are being taken to clear with the Prices and Incomes Board proposed increases in tariffs to our non-VALCO domestic customers. We are attempting therefore to achieve rate increases which should enable us to achieve the required rate of return, particularly if the outcome of the VALCO power rate negotiations is favourable. For this reason, therefore, our current thinking is to place receipts from the increased payment from VALCO in a suspense account, in view of the interim nature of the payment, until a permanent rate is agreed.

In the light of the above, we hope that the Bank will now find its way clear to give its consent to the arrangements made for the interim rate increases and the execution of the Memorandum of Agreement.

Yours sincerely,

VOLTA RIVER AUT.HORITY

Cables VOLTA. ACCRA

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P 0 . BOX M77.

ACCRA . GHANA

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Mr. Juergen Krombach Chief, Public Utilities Projects

Division, Western Africa Regional Office, I.B .R.D., 1818 H Street, N.W.,

!~~~!~~~~-~.c~-~2~~~ U.S.A.

Dear Sir,

Date 18th December, 1973

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~~~~~-~:E~::~ Volta River Authority ---------------------

/~.~' I forward, herewi. th, a copy of the Authority's ~uarterly

Report for the p eriod ended 30th September, 1973.

Encl.

Yours tru~

------- _,,,,,,,,. ~~- U.,4,(-

E.A.K. Ka.litsi for Chief Executive

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Dear • n ahi

r cen~ letter concernin ori and VALCO the l :t-

lleoember 1.3, 197)

uld you pleaoe ad:rl.ae u11, there£ore, whether these prorl.a1ona were intended ae we hue interpreted them end, it ,w, your ~tionil to 'bh• toregoing 'Vi.ews?

also take t.h1e opportunity o£ ealling TOUT attention to Secti;on ~.09(} of the Loan (61 ) Agreement. which atipulatea that t.be Borrower shall aeek to obtain an annual rate o.f retu:m or not lees than 8% on the Government's equity and preaumea that the Authority would erurure compliance with this provision.

With regards._

.;. HJNissenbaum/CPoncia/DDutt/mcs

cc : Mro Quartey Mr. Reitter Mr o Alber- Glanstaetten Mr o King

Clearance & cc: Mro Poncia Mr . Krombach

B. J. W.denbaUDI stem Africa Region

Canadian International I+ Development Agency

December 7, 1973

Mr. H.J. Nissenbaum Western Africa Region

Agence canadienne de developpement international

International Bank for Reconstruction and Development 1818 H Street N.W. Washington, D.C. 20433 U.S.A. ~

DearM~ ba~

Your file Votre reference

Our file Notre reterence 400/00083

We have received final approval for the Electrical Energy Expansion Feasibility Study in Ghana and will be issuing a call for proposals shortly. Proposals are being requested from:

A copy of the re amended and agr.

Attachment 122 Bank Street Ottawa, Canada K1A OG4

1. Acres International Ltd. - Toronto

2. Montreal Engineering Company Ltd. - Montreal

3. Shawinigan Engineering Company Ltd. - Montreal

4. Surveyer, Nenniger & Chenevert Inc. - Montreal

5. Tecsult International Ltd. - Montreal.

t for proposals which include the Terms to by Mr. Quartey, is attache\ ~

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122, rue Bank Ottawa, Canada K1A OG4

of Reference, as finally

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December 3~ 1973

Vol ta Hiver Author.it.y I' • O. tox 1r(7 Accra, Gk:no.

Attn: I:r . E. A. K. talitsi ___ r::-·0c:1~t.!Y.':. Sec1:.9tnr-.y/Di2:£Et£r of .Li.nan~~

110 GH rd' -

&. 618 GH

1:c ref f,r to your request for o.mo1vt.ization schedules by currency ir~ your ] t • '.' "')1/'':v·~ ' I d ,,• ' 8"' 1°r,·3 . . L' ·uer l/Oo r..., UuL;,;, c.:.-c,e .. ovem.:icr /

·,:e l'\':co~:ni~e th(' problems th-:rt. the present fluctu::rt.ions i:n f.1xc!.um6e rat~:o hnve en.used i..Tl fo~~t.cn::;tint.; fut'..lrc Gcbt r'(;pa:·rncnts. ;i11en ,-.re call cti:.A."c:.,cies for· rep::1~T1Cnt. en a L:i·nn cL1t2, -.w 2.ct rnninl:,r to ~'"".::;,1re our ability to r.Jt°C·t. t::1e D n;~ 1 s o::n d::.ot ;:.;crvicf' oblic;ationJJ taki.."1~~ int,o acccunt all knrn..rn rect:ipts .:ind requil·cr.i.•:n::.'.J, ~,he c,nTcncics and mnounts 01.J.1..,st:mdin;~ rn,der each :)a1.,..0icuL:r loin and oth ... )r corTJ:i.r~er·.!t,j_o;:'3 that are ol' ir?_::.01·t~ncc nt; the tinw wri ma,:e t.no C:ill. Sine.-~ 1re G'.'!l::'lOt (~-t:'·b.i5.sh our curr!:'ncy 1~c.-::u:ir.,r:wrr'.-,J more. thc::n a i'c·u 1.10:ntl'.::: in ~d"J;Jj1C~.-, --.:1

• r.~ /:' rcc:-.11 ~,2:r? ort.} .)::--i.ncin1.·tl 1·t·:·p.._.:· T.: :rrt, "' .. ~l1011.3-~ or p ... 11~·GiL:.!.J > ~~n ~·-1:y of t,?1-: cm~rr:;r1cies c;1\~,~t~11ili.n:·; ·u.:·1:lr.:r n lc::2n. L-ri follc ~~:Ln::; t,!1ls pr)~~c·Gi,: ·, 1-.e nre c,c·~in:~ in accord:·nce uith .;;=ct.ion J.OJ(c) o:.'. w:1.11 h£.~;-.il:1tiorw L:o. h eluted i·'cbr·u·1.r.7 1S, 1961 .:md Section /\.0:.::(::::) of Gericr,.11 Conditions ,'ipplic3blo 'tiO Loan urn.i Crua1~mi:.ee MT<"'emem·,::-; CL-'.JT,en ,,;·1111'.U'_v ~l! : J. •,oQ.

cc: Hess rs. ]utland/Gray, Elliott

RXenney/enh

File Lonn Docs . 310 GH - foan noes. 618 GH

Sincerely yours,

D. 1

,·;., ~r·ay Depui;;>7 Chief: tccmmtil10; Division

C.on-i,rolJ.c::r' 3 D:,p,.-rtment

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P. 0 . BOX M77.

ACCRA . GHANA Our Ref. 'J- 3/ / ~Ir,'-:, Yo ur Re f.

Cables VOLTA, ACCRA

Phone 64941

Date. 23rd November, 1973

Ji r , ~c~or C, Chang. Depuontroller, International Bank for Reconstruction Dato ~ak' 1

and Development , 1818 H Street, N. Uo, Washington D. C. 20433, U. S. A.

Dear Sir ,

RE: LOAN NOo 618

fe acknowledge receipt of your letter dated November 6, 1973 and uish to assure you that we also attach great importance to the necessity of paying promptly on due dates, and our records in the past trould show that we have , in f act , been paying on time .

With regard to payments due in June under Loan 618 GH, you will notice from our payment instructions to our bankers in New York Morgan Guaranty Trust Company of New York, ( copied to you) that we asked them to pay on June 15, and June 16 , 1973 as required. We did not expect that payments would be received by the depository banks late, since we had instructed that payments be made on the due dates.

We will continue to send you copies of our payment instructions to enable you check directly from our paying bank if there is any delay with your depository banks receiving payment .

We have, under separate cover, written to Morgan Guaranty Trust Company of New York, drawing attention to this delay , and hope every effort will be made to avoid a recurrence of delays in paying.

cc : The Principal Secretary,

Yours faithfully , ~

~ - k-u,-1 E. L . Quartey

CHIEF EXECUTIVE

Ministry of Finance & Economic Planning, Accra.

Mr • .ruergen Krombach, Chief, Public Utilities Project Division, Western African Regional Office, 1818 H. Street, N. W. , Washington D. C. 20433 , U.S. A.

Mr# Y. Khelif - Executive Director .

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Form No. 27 (3-70)

INTER NATIONAL DEVELOPMENT INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE

CORPORATION ASSOCIATION

TO:

COUNTRY:

TEXT:

REITTER INTBAFRAD ACCRA

GHANA

OUTGOING WIRE

DATE: NOVEMBER 21, 1973

CLASS OF

SERVICE:

Cable No.: 204

AUTHORIZED BY:

NAME

DEPT.

REFERENCE:

LE~ BANK NOW" REVIEWING RECENT FROM VRA RE INTERIM RATE INCREASE .AND

11 TOR FOR INDEPENDENT RATE STUDY STOP PLEASE ADVISE WHETHER

AUTHORIT'l HAS ALREADY COMPLETELY AGREED WITH VJ\LCO ON THESE

TERMS STOP DOES QUARTEY PLAN ATTEND MID-DECEMBER MONROVIA

:MEETnm AFRI CAN POWER MAlifAGERS WHI CH RI BI SCHEDULED PARTICI PATE

NISSENBAUM

NOT TO BE TRANSMITTED

CLEARANCES AND COPY DISTRIBUTION:

Clearance & cc: .Alber-Glanstaetten H J Nissenbaum

For Use By Communications Section

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You y find tho ov 1n!o. · t1on w,eful in t io e'1CUt t.,:it you would dl!lru: 1.t McemG ey t:o arrangtt fur • f in,al t-evisicn 1n the Allceat1ou of :"roe of thin J..o .•

ect t*J: . ?. .. met A. !U.hi (1~t'Qject:a 1 H._ .\fr ica) ~a-. Ch.ri eopbcr -R .. hue!. (Lq~l) Af1;ica f\l~ ./

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Cables VOLTA, ACCRA

Our Ref. 330/oo~ona 84941

Your Ref.

P. O. BOX M77,

ACCRA . GHANA

Date 16th November., 1973.

Mr. Juergen Krombach, The International Bank for Reconstruction

and Devel opment, West African Regional Office, 1818 H Street., N.W. Washington D.c . 2)433

Gentlemen,

MEMORANDUM OF AGREEMENT ON V.ALCO POWER RATE

We wish to remind you of our letter No.330/001/7746 dated 18th October, 1973 on the above subject matter, and request your consent to enter into the Agreement contained in the said letter with Val.co.

We would appreciate

uat.e keo '4. M~ · JCo t lq"')':l_,

Date Aok' d. l~~-·-~~1 1 ·~ -- cGJit_ lssigned to ~

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an early action on the matter.

Yours faithfully,

" (E. L. QU.ARTEY) CHIEF EXECUTIVE.

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Raf''arenca • an 616 catesor.r Application o. 134

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'T'ou r Ref.

Intern~tional Bank for Reconstruction and Development

1818 H Street, H .'i. ti ashington D. C • 2011-3 3 ---------------------

C>ete 8th Nover.ibor, 1973

u S A Attenti on: Mr . D.W. Gr!>" • -· ""Ii'

Dear Sir, Re Loans 310 GH and 618 GH

Repa.,vment --------------------------

Deputy Chief, Accounting Division, Controller 's Dept.

The loan schedules, incorporated in your loan agreements

310 GH and 618 GH with the VllA , show the .interest end principal re­

payments in U .,3 . doll .'.l.r at the rates of exchange in for ce at tee

time the a5l'eem ents were sic;ned 1 even though some of th Q.iI!ounts

maldn~· U_? the loa..Yls were drawn up in currenci cs other tha.'l the

u.s. dollars.

With the fall in value of the U .s. dollar , r el ative to the

other curr~ncies participating in the loan, we hn.va notioed t}w.t in

about U.S . dollars 500,000 .

'l'he effect of' this is tnat we are now not in a position to

prepare accurate forecasts of oilr cash requiroments for debt servicing

purpo3es. Vie would thorcfors be gr,1.teful , if a statement showil18 tho

date (or dates) when each of the non-U .s . dolla r eleoents o.f principal

and interest rep:-_ymcnt falls due, could b e furnished to us ..

Thunk you for your cooperation.

Yom·s truly

~~-· E~A. K. Ka.litsi

Execut ive Sacretary/Diractor of i'in .::;nce

Re: Lo

Mr. Y. Khelif - Ex cutiv nir ctor

Cur cz

1

S! cerely y •

cc: Mr. Aldewereld Mr. Chaufournier 1r. Dutt

Messrs. Rutland/Gray L. Grothe/ ST

ry

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VOLTA RIVER AUTIIORIT~ \.

Cables VOLTA. ACCRA

.. 33 ,.. /. I/ Phone 64941 Our Ref v/00~ rr'f~

P 0 . BOX M77.

ACCRA . GHANA

Your Ref.

The International Bank for Reconstruction and Development,

West Af'rican Regional Office, 1818 H Street, N.W. Washington D.C. 20433

Gentlemen,

M:EMORANDUM OF AGREEMENT ON VALCO POWER RATE f,;, ,.

1. In the course of the negotiations leading to the Third Amendment to the Power Contract between Valeo and 1:his Authority, it was agreed between the parties that further discussions would be undertaken between Valeo and the Authority with regard to the price for power now supplied and 1:he price and quantity of power under option. Following a series of discussions between Valeo and the Authority, the following formula has been agreed upon for achieving this purpose:-

( 1)

(2)

(3)

Valeo 110uld pay, as from 1st March, 1973, an additional 0.375 United States mills per unit ( "Interim Rate Imrease") for the Authority's power. That is to say, from that date, Valeo would pay the 2. 75 mills per unit provided for in the Third Amendment plus another 0.375 mills per unit (i.e. 3.125 mills per unit).

The Authority should bu.ild a third double circuit transmission line from Akosombo to Tema within three years.

An independent and reputable Consultant would be appointed by the Authority, and paid with f'unds provided by Valeo, to study and review the power rate and make recommendati.ons which should not be deemed to be binding on either party. Both parties would be given the opportunity to present their views to the Consultant and would subsequently meet to discuss the Contultant's recommendations, in an attempt to arrive at a mutually acceptable figure as the permanent rate for power.

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(4) In the event of Val.co and the Authority failing to reach agreement on a permanent rate or agreeing to a figure leas than 3.125 mills per unit, then any portion o'f the additional o. 375 mills per unit paid by Valeo to the Authority which is not covered by the operative permanent rate should be deeaed to be a repayable advance by Val.co to the Authority for the construction of the Akosombo-Tema third double ciroui t transmission line.

( 5) On the other hand, should the agreed permanent rate exceed 3.125 mills, Valeo should pay the difference to the Authority with effect from 1st March 1973, unlesa otherwise agreed.

( 6) If no agreement ia reached on a change to the permanent rate by the time the Interim Rate Increase equals US $1,950,000 the payment of the extra 0.375 mills per unit should cease unleaa otherwise agreed.

( 7) The Power Contract, as hitherto amended, shall remain in force subject to this Memorandum of Agreement.

2. The particulars of this agreement have been incorporated in the enclosed draft MemorandUlll of Agreement the text of which has been mutually settled between the Authority and Valeo.

3. Under and by virtue of section 6.02( d) of the Authority• s Loan Agreement with you dated 23rd June 1969 (Loan No. 618 GH) we hereby request your consent to enter into this Agreement w:i. th Valeo.

Kindly let us have your reaction at an early date.

Yours faithfully,

E.A. MeDSah AG. CHIEF EXECUTIVE

Mr. E.A. Mensah Ag. Chi r Executive Volta River Authority P.O. Box M77 Accra., Ghana

October 11 ., 1973

GHANA - Loan 618-GH

Dear Hr. Mensah1

We acknowledge receipt of your letter dated October 1 , 197),

enc1.os1ng four copies of the Volta River Authority's Annual Report

and Accounts for the year ended December 31 , 1972.

We are presently reviewing the above mantioned document and

it we have an7 comments we will write to you.

cc: Mr. Ribi Miss Leibelson Files

Control No. GHA-3-153

LLeibelson/11

Yours sincerely,

Ren6 A.Ribi

(tor) Juargen Krotnbs.ch, Chief Public Utilities Projects Division Western Africa Regional Offiee

' ,.

Mr4 E. Lo Quartey Chief Executive Volta River Authority Po Oo Box M 77 Accra, Ghana

Dear Mr. Quarteyt

October 4, 1973

GHANA - LQa.n 618~GH

We acknowledge receipt of your letter dated September

5, 1973, enclosing (4) copies of the Volta ~ver Authority's

Annual Report and Accounts for the Y.ear ended Jlst Deoember; 1972~

We are presently reviewing the above mentioned do·cl,Ull8nts

and if we have any comments we will wr.l.te to you.

Control Nao GHA-3-143

Alber~ taetten:cs _

Yours sincerely,

Rene A. Ribi

(for) Juergen Krombach, Chief Public Utilities Projects Division Western Afr.tea Regional Office

Mr. E. L. Q rt y Chief Ex cutiv Volta Ri.ver Authority P. 09 Box M 77 Ace , Ghana

r Mr. Q rtey_i

October 4, 1973

GHANA - n 618-GH

We acknowl dge receipt of your letter dated Sept iber

14, 1973, enclosing a copJ' of the Volta River Author:ityts Q rterly

Report for the period ended .30th Jun, 1973.

and if e hav an:y co nte w Will write to yo •

Control Noo GHA-3-14S ;·

.Alber-Gl~ten:cs

Your since ly,

Rene A. Ribi

(for) Juergen ch, Chief Public Utilitie Project Dlvision o t m Uric gional Offic

.~·

Cables VOL TA, ACCRA

r'n./1 /,0:7, 1"\ )-,_ Phone 64941 Our Ref.0 U /' ' V d-/ 1 ?-?, f'

P. 0. BOX M77.

ACCRA.GHANA

Your Ref. Date. 1st October,

Date Reo •a . CJ,(\ l~ _ ___ _ _ ,! _ ___ _

Chief, Public Utilitifts Pl'Oject Divis ion, Westem African Ree:l.onal Office,

Date Aak'd. -----------1818 H. Street, N.W., Washington D.o. 20433 U.S.A.

Gentlemen,

Assigned to-----------­

H.- . Ae~ ------------G-HA-~- 1 i;s ..._._ ___ .., ____ _

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V .R.A. ANNUAL REPORT FOR 1972 1,, A"'" • ---- -

fJ t( / We have pleasure in forwardine, herewi tl{, four ( 4) copies

of the Volta River Authority's Annual Report and Accounts for

the year ended 31st December, 1972, for your information and

records.

~=

Yours faith.fully,

• Mensah Ag. CHIEF EXECUTIVE.

1973.

RECE.\VE.D

\973 OCi IO nt, 9: 43

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