Liberia - Fourth Power Project

Report No. 1 746a-LBR Appraisal of the EL t rt %"- Liberia Fourth Power Project June 5, 1978 Regional Projects Department Western Africa Regional Office FOR OFFICIAL USE ONLY H Document of the World Bank This document has 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.  Currency Equivalents The official monetary unit is the Liberian dollar, with a par value equal to the U.S. dollar. The U.S. dollar is legal tender in Liberia Units and Measures GWh = Gigawatt hour = 1 million kWh kWh = Kilowatt hour ton = metric ton = 2205 pounds bbl = barrel = 42 US gallions gall = gallon 1 long ton of fuel oil approx. 6.3 bbl mile = 1.609 km m = cubic meter million m3 810 acri-ft sq. mile = 2.59 km kW = kilowatt MW = Megawatt =1,000 kW kVA = Kilovolt - ampere MVA = Megavolt - ampere = 1,000 kVA kV = Kilovolt = 1,000 volt V - volt 1 km2 = 0.62 miles 1Ikm2= 0.386 square miles BTU = British Thermal Unit KJ = Kilojoule m-J Megajoule Abbreviations and Acronyms BADEA = Banque Arabe du Developpement Economique en Afrique EIB = European Investment Bank LEC = Liberia Electricity Corp. PUA = Public Utilities Authority KfW = Kreditanstalt fur Wiederaufbau JICA = Japanese International Cooperation Agency MD = Managing Director, LEC Fiscal Year January 1 - December 31  FOR OFFICIAL USE ONLY LIBERIA APPRAISAL OF THE FOURTH POWER PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS .................. ... ........... i - v 1. INTRODUCTION ................................ ............... I 2. THE POWER SECTOR ....... .............1................... The Country and the Economy ....................... 1 Power Sector Background ........... ................ 2 Energy Resources ......... . . . . . ............................ . ... . 4 Existing Facilities .............................. . 4 Monrovia Power System ................ 4 Branch Power Systems ................. 5 The Power Market - Monrovia System 5............... 5 Sector Planning and Development Strategy .... ...... 7 Supply of Electricity to Urban Poor ... ............ 8 Sector Objectives ...... ........................... 9 3. THE PROJECT.... 9 Project Description ............. ... ............... 9 Project Cost ...................................... 11 Implementation Schedule ........................... 13 Status of Project ....... .......................... 13 Project Execution ....... .......................... 13 Project Financing ....... .......................... 14 Procurement and Disbursement ...................... 15 Environmental Impact ............. ................. 16 Project Risks ....... .............................. 16 4. JUSTIFICATION .......................................... 16 Bushrod Power Plant Extension ..................... 16 Demand and Available Supply .............. .... 16 Least Cost Solution ..... ..................... 16 Return on Investment ..... .................... 18 5. THE BORROWER ........ ................................. 19 Organization .......... ...................... ....... 19 Staff ...................... .................. 19 Management ........................................ 19 Training and Manpower Planning .................... 20 Branch Stations ................................... 21 Insurance ........ ................................. 22 Accounts and Audit ................................ 22 Tariffs ........ ................................... 22 This report was prepared by Messrs. Ali Nawaz Memon and Alfonso Posada. This document has 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.  Table of Contents (Cont'd) Page No. 6. FINANCES ........................................... 23 General ...................................... 23 Past-and Present Finances ......................... 23 Energy Losses ..................................... 24 Accounts Receivable ................................ 25 Financing Plan. ................................... . 26 Revenue Covenant .................................. 28 Future Financ:ial Position ......................... 28 7. RECOMMENDATIONS ....................................... 29 LIST OF ANNEXES 1. Existing Power Facilities 2. Description of the Project 3. Project Implementation Schedule 4. Justification 5. Disbursement Schedule 6. Investment Program 7. Tariffs 8. Income Statement 9. Cash Flow 10. Balance Sheet 11. Assumptions in Preparation of Financial Statements 12. Debt Service 13. Computation of Firmn Capacity 14. Outline of Training Measures 15. Performance Indicators MAP IBRD 13140  LIBERIA APPRAISAL OF THE FOURTH POWER PROJECT SUMMARY AND CONCLUSIONS Introduction i. The Government of Liberia and the Liberia Electricity Corporation (LEC) have requested assistance in financing a power generation expansion to cover the electricity consumption of LEC's system up to 1985. A Bank loan of US$10 million is proposed. ii. The Borrower would be LEC, an autonomous Government agency, created in 1973 and entrusted with the responsibility for generation, and distribution of electric energy for public use in Liberia. iii. This would be the fourth Bank operation in the power sector of Liberia. The first two (Loan 684-LBR of US$7.4 million in June 1970 and 778-LBR of US$4.7 million in July 1971) helped finance a 34 MW expansion of the Mt. Coffee hydro plant, two 19 MW gas turbines at Bushrod Island, and associated transmission and distribution facilities. The Bank made a sup- plementary loan of US$2.9 million in 1973 to cover project cost increases arising from (i) currency fluctuations and (ii) an increase in the size of gas turbines chosen for installation. Physical aspects of the operations were completed in a satisfactory manner with some minor delays. Subsequently, however, the two 19 MW gas turbines have developed operational problems. LEC has been able to obtain cooperation from the manufacturers in solving these problems. The third power Loan (Loan 1150-LBR for US$1.8 million in 1975) currently underway, is providing technical assistance to improve sector management, particularly in areas of senior staff, financial management and development planning. As observed in the Operations Evaluation Department (OED) report (No. 1551), dated March 31, 1977, for loans 684-LBR and 778-LBR, the institutional objectives have not been achieved--the Liberian staff is still unable to assume senior management responsibilities, energy losses are high, and the financial position of LEC is weak. These are serious problems. Attention is being focused on these and other problems under the proposed project. The Power Sector iv. The gross electricity consumption in Liberia was about 1,000 GWh in 1976 of which 62% was produced by the iron-ore and rubber industries and 38% by LEC. LEC's Monrovia System (installed capacity 138 MW) covers a coastal strip in Western Liberia--100 km by 200 km--from Robertsport to Buchanan. LEC also operates, on behalf of the Government, several small provincial systems with a total generating capacity of about 8 MW. Exclud- ing the mining consumption, annual per capita generation is 250 kWh which compares favorably with other countries in West Africa. However, public electricity supply is presently connected to only 10% of the country's total population. The project includes components which would permit the connec- tion of about 5,000 low-income households presently without electricity in  - ii - the Monrovia area and studies for extension of service to adjoining rural areas. v. LEC's main generating facilities consist of a 64 MW run-of-the-river plant at Mt. Coffee on the St.. Paul River and a 74 MW gas turbine and diesel electric power generation plant on Bushrod Island. Since the river flow at Mt. Coffee is unregulated, the power output during the dry season drops con- siderably to about 10 MW. The firm capacity of LEC's generating facilities is therefore much lower than the installed capacity reaching only 65 MW. This firm capacity is just sufficient to meet the current peak demand in the Monrovia system which stands at 65 MW. Hence, additional generating capacity will have to be provided to meet the expected load growth. The project would address itself to this subject. The Project vi. The Fourth Power Prcoject consists of seven components, (a) a 26 MW extension of diesel generating capacity of the Bushrod power station; (b) service connection and arrangements for interior wiring for about 5,000 urban poor households; (c) maintenance vehicles and tools; (d) staff training facilities and employment of instructors; (e) employment of a management team to assist LEC's Liberian personnel; (f) a frequency conversion study; and (g) a study of transmission to supply the Gbarnga rural area. vii. The Fourth Power Project is an interim project needed to fill the supply gap and to meet the demand forecast in the Monrovia area through 1985 until a new hydroelectric generating facility can be built. The project has no negative impact on the environment. viii. The project is estimated to cost US$31.6 million with an off-shore component of US$29.4 million. Project costs include provision for physical and price contingencies. CofiLnancing is contemplated and several inter- national lending agencies (EIB, BADEA and Saudi Fund) contacted by both the Liberian Government and the Bank have approved in principle their participa- tion. The on-shore cost of the project, amounting to US$2.2 million, will be financed from internal cash generation. ix. The risks involved in implementation of the physical aspects of the project are not greater than normal for projects of this type. The non-physical aspects (i.e. management, training, and financial viability) depend on finding adequate personnel and the political will to make and carry through difficult decisions. Akppropriate assurances have been obtained from the Government and LEC to reduce these risks to the extent possible. x. LEC has engaged the service of qualified consultants, Motor Columbus (Switzerland), who are acceptable to the Bank, to assist in engineering, preparation of bidding documents, evaluation of bid proposals, equipment fabrication inspection, and construction supervision of the Bushrod power station extension. Motor Columbus has had ample experience with similar works, and with its assistance, LEC should be capable of successful execution of this main component of the project. The implementation schedule is based  - iii - on the need to have the first unit of the proposed extension in operation in January 1980 at the beginning of the dry season. xi. All work and equipment items of the project involving foreign financing will be procured through international competitive bidding. Items to be financed by the Bank will be contracted through international competi- tive bidding following the Bank's guidelines. Retroactive financing of about US$600,000 is recommended to cover the engineering and management services. xii. The extension of the Bushrod power station with low-speed diesels is the least cost solution for meeting the electricity demand forecast in the Monrovia System through 1985, for all discount rates up to 12%. It is also the most practical solution taking into account advantages not directly quantifiable, such as simpler and more reliable operation. On the basis of benefits evaluated at the current tariff level, the rate of return on invest- ment of the power expansion project covered under the proposed loan would be 17%. The Borrower Organization, Staffing and Management xiii. In recent past several people besides the Managing Director (MD) have been involved in LEC's operational activities. Assurances have been obtained that MD will be permitted to exercise the management responsibilities accorded to him under the legislation establishing LEC. The Bank would be notified prior to appointment of MD. LEC, with a staff of about 800, is over-staffed at the non-professional levels. LEC has agreed that there would be no increase in non-professional staff during project implementation and that surplus staff would be trained and productively utilized on the expanded facilities. xiv. LEC is short of qualified and experienced Liberian staff at high levels, and has to rely heavily on expatriate staff for management. Accord- ingly, LEC/Government has recently signed a contract satisfactory to the Bank, with Tata Consulting Engineers (India) for the provision of a management support team. It has been agreed that (a) the management team would devote about half of their time to training senior Liberian staff and execution of the proposed project; (b) senior Liberians who have reasonable potential would be given departmental responsibility, with expatriates functioning as their advisers; for the remaining expatriate posts, a tentative schedule of Liberian- ization and an appropriate training program would be a part of the manpower plan which would be completed within six months of signing of the proposed loan agreement; and (d) at least two Liberians should be identified and prepared for each expatriate post. Training xv. Agreement has been reached on essential elements of a comprehensive training program for Liberian staff at each level. It is agreed that: (a) a  - iv - training manager/adviser be provided as part of the management team; (b) senior Liberians who will not immediately become departmental heads but who are expected to do so would receive the required training; (c) a course for supervisors currently offered by a local mining company should be util- 4zed; (d) for training technical, accounting and administrative staff, a training school would be esta'blished on LEC premises; US$0.75 million has been included in the project for this purpose; and (e) all staff members receiving extended training should continue to sign employment contracts with LEC requiring them to serve for an agreed period. Branch Stations xvi. Branch stations, which are operated by LEC as an agent of the Gov- ernment, currently face severe technical, managerial and financial problems. The Government and LEC have agreed to continued separation of branch station finances, pre-financing of capital expenditure and estimated losses by the Government, recruitment of required personnel, submission of a revised fuel transport contract, and maintaining of the recently established branch stations department in LEC headquarters. With these agreements, it would be appropriate for LEC to operate the branch stations. Accounts and Audits xvii. LEC has been able to submit audited reports on time. In addition to maintaining the present covenant regarding external audit, assurance has been obtained that LEC will forward a detailed letter to the Bank yearly, within two months after completion of the external audit indicating the corrective action that is being taken on issues raised by the auditors in their audit report and the internal control report. Finances xviii. The financial posit:Lon of LEC has been very weak--energy losses are high (at about 29%), collection of accounts receivable is poor, rate of return (1.9%) and debt service coverage (0.85) are low, and the liquidity problem has been serious. In order to reduce energy losses, block mapping (clearing of fraudulent consumption) would 'be continued and the legislation which treats theft of electric energy as any other theft would be vigorously enforced. Accounts receivable would be reduced through a vigorous disconnection program and agreement with Government 'has been reached on a mechanism for prompt settlement of its electricity bills. A tariff increase of 23% on non-mine customers effective March 1, 1978, introduction of a fuel adjustment clause, provision of a $2.8 million soft loan from the Government, and controls on operating expenses have been agreed. Even with the introduction of these measures the rate of return on historically valued assets is estimated to be only 1.9% in 1977 compared to the 10% rate of return on revalued assets required under the existing loan agreements, and 8.2% in 1978. However, based on the assumptions outlined int this report, the return will be above 11% on historically valued assets in each year through 1982. On completion of the asset revaluation exercise in 1978, LEC should earn an annual rate of return on currently valued net fixed assets of not less than 8% starting calendar  - v - year 1979. LEC is expected to have a tight cash position through mid-1979 and might use overdraft; however, cash position would improve thereafter. Debt service coverage would improve from 0.85 in 1977 to 1.6 in 1978 and over 2 thereafter. Internal cash generation over the 1977-82 period would amount to 38% of total requirements. With implementation of all the measures proposed, the overall financial position of LEC should be satisfactory.   I. INTRODUCTION 1.01 The Government of Liberia has asked IBRD and several cofinanciers to help finance a project of the Liberia Electricity Corporation (LEC), the Government-owned utility responsible for the generation and distribution of electricity in public consumption areas of Liberia. The project comprises: (a) the extension of the Bushrod power station; (b) service connections to Monrovia's urban poor population; (c) maintenance vehicles and tools; (d) staff training; (e) employment of a management team; (f) frequency con- version study; and (g) a study of transmission to supply the Gbarnga rural area in northcentral Liberia. 1.02 This would be the fourth Bank Group operation in the power sector of Liberia. The first two (Loan 684-LBR of US$7.4 million in June 1970 and 778-LBR of US$4.7 million in July 1971) helped finance a project consisting of a 34 MW expansion of the Mt. Coffee Hydroelectric Project, two 19 MW gas turbines for the Monrovia system, and associated transmission and distri- bution facilities. The Bank made a supplementary loan (Loan 778A-LBR) of US$2.9 million in 1973 to cover the project cost increase because of currency fluctuations and an increase in the size of the gas turbines chosen for installation. Physical aspects of the operations were completed in a satis- factory manner with some minor delays. The two 19 MW gas turbines have subsequently developed operational problems which are discussed later in this report. The third power loan (Loan 1150-LBR for US$1.8 million) currently underway is providing technical assistance to improve sector management, particularly in the areas of senior staff, financial management, and long- range development planning. 1.03 OED report dated March 31, 1977 for loans 684, 778 and 778A-LBR has commented mainly on (i) lack of progress towards 'Liberianization' of senior management, (ii) low rates of return, (iii) liquidity problem, (iv) increase in energy losses due to illegal connections, and (v) increase in accounts receivable. Even today these remain as serious problems. A number of measures are proposed in Chapters 5 and 6 to deal with each of these problems. The rate of return is expected to improve starting in 1978. Liquidity is expected to improve substantially by 1980. However, 'Liberianization', reduction of energy losses and substantial improvement in accounts receivable will take longer. 1.04 The proposed project was appraised in May 1977 by Messrs. A. Memon and A. Posada. Training aspects were reviewed by Mr. Chittleburgh in August 1977. 2. THE POWER SECTOR The Country and the Economy 2.01 The Republic of Liberia lies at the southwestern extremity of the 2 western bulge of the African continent. Its area is approximately 110,000 km and its population is estimated at 1.6 million. The country, therefore, has a relatively low density of population--about 15 persons per km .  - 2 - 2.02 In recent years there has been a population shift toward larger towns. The annual population growth rate for Monrovia, the capital city, was 8% between the years 1962 and 1974 versus 3.3% for the whole country. The majority of Liberia's population is concentrated in the Monrovia and Harbel areas and along the principal highway connecting Monrovia with Gbarnga and Sanniquellie in the northeastern part of the country. About 30% of the country's population lives in urban settlements of 2,000 or more persons; the remaining 70% lives in rural areas, and is mainly dependent on subsis- tence farming. 2.03 The economic structure of Liberia is characterized by the co- existence of both a modern and a traditional sector. The modern sector--in which iron-ore mines and rubber plantations play an important role--is based on market-oriented productio,n and use of modern technology. There is little interaction between the trad:itional sector, organized on a subsistence basis, and the modern sectors of the Liberian economy. Annual per capita income, which averages US$450, is unevenly distributed--70% of the population has US$100 or less. 2.04 The dominant contribution to GDP (US$840 million in 1975 at current prices) is provided by the modern sector with 86% of the total GDP. A main portion of this modern sector corresponds to the concessions which account for 37% of the total GDP. Concession activities are carried out by private investors (mainly foreign) who have specific agreements with the Government. The largest one is iron-ore mining which contributes 28% to the total GDP. Liberia has an abundance of iron-ore reserves and is one of the world's largest exporters. In 1975, the exported iron-ore and concentrates--18 mil- lion tons, with a total value of US$294 million--accounted for about 75% of total export earnings. Three mining companies, namely LAMCO (Liberian- American-Swedish Minerals Co.), BMC (Bong Mining Co.) and NIOC (National Iron Ore Co.), operate in the country. About 11,000 persons are permanently employed in this sector. 2.05 A major share of Liberia's rubber production is also controlled by foreign interests under concessions, the largest being Firestone, a US-owned corporation. Although the production and processing of rubber under con- cession accounts for only US$46 million, 6% of GDP, it represents an important source of employment and income for about 42,000 persons. Power Sector Background 2.06 Until 1975, Liberia's public electricity supply was the responsi- bility of the Public Utilities Authority (PUA), an autonomous statutory corporation created in 1962 to provide Monrovia's electricity, water supply and sewerage. Earlier PUA's role was changed to a Government holding company with subsidiaries for power, water and sewerage, telecommunications and broadcasting. The Power Division of PUA then became LEC. In 1975, the Government abolished PUA and made LEC an independent corporation. LEC's financial and managerial weaknesses which had originated under PUA, and were the main reason for this reorganization, have not noticeably improved (see  Chapters 5 and 6). Liberian staff is still unable to assume senior management responsibilities, electricity losses are high, and the financial position of LEC is weak. A number of corrective measures are outlined in chapters 5 and 6 to deal with each of these problems. 2.07 LEC's Monrovia power system, i.e. the system serving a narrow coastal area from Robertsport to Buchanan, is the main source of public power, although LEG also operates eight secondary centers, called "branch stations", as an agent of, and with funds provided by, the Government. LEG generates about 37% of the country's total electric energy produced (1004 GWh in 1976) Industrial producers--mainly the iron-ore mining and rubber companies-- produce the remaining 63%. To serve its Monrovia System demand, LEC pre- sently has 138 MW of generating facilities, of which 64 MW are hydro and 74 MW thermal. The branch stations generating facilities are all diesel elec- tric and total about 8 MW name plate rating. 2.08 When the mining companies started operations, PUA served only Monrovia and could not supply their power and energy requirements as the mining concessions were in remote areas. Consequently the companies in- stalled their own generating facilities and were later reluctant to depend on a power supply outside their own control. Nevertheless, LEC sells power in bulk to one mining operation, Bong (BMC), which is closer to Monrovia than the other companies (see Map IBRD 13140). Until the beginning of 1977, when the exhausted mine was closed, LEC was also furnishing power to the Bomi Hills iron-ore mining operations of the Liberian Mining Company (LMC). 2.09 The privately owned power generating facilities total 143 MW; the principal ones being LAMCO's 48 MW (12 MW at Nimba and 36 MW at the port of Buchanan), Bong Mine's 68 MW, and Firestone's 7 MW at Harbel rubber planta- tion. Excepting 4 MW hydro at Harbel, all these generating facilities are thermal (diesel). Adding LEC's installed capacity of 138 MW, the total generating capacity installed in Liberia is therefore 281 MW, of which only 68 MW are hydro. The country is served with AC, at 60 cycles per second; Liberia, being the only country in West Africa employing this frequency, all other countries use 50 cycles per second. 2.10 The role of mining and its impact on power consumption (commerce, especially in Monrovia), is reflected by the annual power generation per capita of 630 kWh which is unusually high for a country with such a low level of income. Excluding the mining systems, the generation per capita is 250 kWh a relatively high specific consumption for West Africa. Public electricity supply presently serves 15 towns with some 400,000 people, (about 25% of the total population of Liberia) only 40% of whom live in households with a connection. The degree of electricity coverage is, there- fore, very low, reaching only about 10% of the country's population. The project addresses itself to this situation, particularly to providing connec- tions for urban poor households and studies for extension of service to adjoining rural areas. Rural areas are primarily served by branch stations (para 2.15).  -4- Energy Resources 2.11 The only indigenous source of energy, hydro electricity, is limited. There is little slope in the river valleys and stream flow varies widely between the six-month rainy and dry seasons. Except for the Mano and Cavalla rivers bordering Sierra Leone and Ivory Coast respectively, there are no favorable sites for storage. The national hydroelectric potential located wholly in Liberian territory is estimated at about 1,300 GWh per year with limited storage. The installation of about 220 MW at an average capacity factor of 67% would be possible but only about 50 MW of this capacity would be firm. Substantial parallel investment in thermal plant would still be needed to firm up hydro-electric production. The hydroelectric potential of the Mano and Cavalla rivers, which would be divided equally with Liberia's neighbors, is estimated at 2,000 GWh per year; installed capacity would be of the order of 500 MW, 50% of which would be firm. Altogether, Liberia's hydroelectric potential can, therefore, be assessed at about 2,300 GWh average annual production capability and 175 MW firm power capacity (paras 2.17-2.20). Existing Facilities Monrovia Power System 2.12 The Monrovia Power System serves the capital city of Monrovia (population 240,000); Buchanan (population 35,000) the railhead and port for the LAMCO operations; Kakata (population 5,000), a small but important trad- ing center northeast of Monrovia; the international airport at Robertsfield in the center of Firestone's Harbel operations; and the BMC concession area. Robertsport will soon be connected to the Monrovia System. 2.13 LEC's Monrovia System consists of: the Mt. Coffee hydroelectric power plant on the St. Paul river, equipped with four units, two 15 MW and two 17 MW; and (b) the Bushrod thermal power station with four gas turbine units, one 13 MW, one 14 MW, and two 19 MW, plus five diesel electric units with a total capacity of 9 MW. Mt. Coffee is a run-of-river plant with pondage for limited peaking operation; during the rainy season (lasting from May to November) the river's flow normally exceeds the requirements of the four existing units, but in the dry season it drops to a level where only one unit can be run at about 10 MW power output. While the 13 MW and 14 MW gas turbine units at Bushrod have operated satisfactorily the availability record of the two 19 MW units purchased with funds from Loan 684-LBR has been very poor; the serious problems which account for this are discussed in Annex 1. LEC has been able to obtain cooperation from the manufacturer in correcting these p blems. On the assumption that both of these units will be in normal working condition and that both units will be normally available during dry seasons 1/ (at least for a limited number of hours of peaking operations) 1/ The gas turbines will operate only for peaking duty once the proposed project is implemented. Moreover, these units will be operating in a more stable electric system due to the large inertia of the new proposed units and, therefore, will be less subject to thermal and mechanical stress from frequent tripping as is presently the case.  the Monrovia System's present firm capacity is 65 MW (Annex 15). This firm capacity is just sufficient to meet the current peak demand of the system which stands at 65 MW, so that additional generating capacity will have to be provided to meet expected load growth. This is the principal justification for the project. 2.14 LEC's transmission and high voltage distribution network has been improved with the help of Bank Loans 684-LBR and 778-LBR, and a Credit from KfW; it consists of 450 km of 69 kV transmission lines (see Map IBRD 13140) and 1,400 km of 12.5 kV distribution feeders. The 69/12.5 kV installed transformer capacity is shown in Annex 4. Monrovia's downtown area is served by an underground distribution system. LEC has applied to KfW for an addi- tional credit of US$2.6 million to complete this underground distribution system. Secondary distribution voltage is 120 V, although, voltage in the downtown area will be stepped-up to 220 V when the underground system is completed. Altogether the transmission and distribution network is ade- quate to handle the medium-range loads foreseen through 1985. Branch Power Systems 2.15 The eight small centers operated by LEC on behalf of the Govern- ment are not connected to Monrovia's grid. Most of the diesel electric units in these small systems are worn-out or require complete overhauls; LEC has presented to the Government a program to improve the situation in the short run by replacing some of the generating units and by creating a new department to supervise the operation of these branch stations (see also para. 5.10). LEC has decided to complete the 69 kV line from Monrovia to Robertsport, of which about two thirds already exist, and to study the extension of electric service from Mt. Coffee to Gbarnga; in both cases the small generating sets will be phased out. The Power Market - Monrovia System 2.16 Development of LEC's Monrovia System was affected by an abrupt change in growth pattern in 1973. Until the oil crisis, electricity demand had developed rapidly (at an annual rate of 12% between 1969 and 1973), as a result of industrialization in the capital city area. However, growth was sharply affected by high tariff increases (40% to 60% in 1974) and by slug- gishness in economic activity reflecting the world-wide recession, and fell to an annual rate of 3% during the period 1974-1976 (the tariff increases were introduced to compensate for the high cost of thermal generation caused by the steep increase in petroleum fuel prices and by the lower than average hydro-electric generation due to the Sahelian drought of 1972/73). Electri- city generation reached 384 GWh in 1976 with a peak demand of 65 MW. Recent studies by LEC's consultants, Motor Columbus, indicate that electricity generation will tend to grow during the next decade at a somewhat faster rate (7% per year) than it has in the last three years, and will reach 686 GWh in 1985 with a peak demand of 112 MW. This forecast is reasonable and has been developed both by adding up demand projections by consumer categories and special loads, and by macroeconomic correlation. Annex 4 provides details on  - 6 - which the forecast is based, as well as statistical data on past generation by sources of energy, peak demand, sales by categories of consumers, and losses. The Table below summarizes the main features of the market. Average Annual -------Actual------ Forecast Rate of Growth in % 1969 1973 1976 1985 1969/73 1973/76 1976/85 Sales (GWh) Mines /1 45 93 86/4 98 20 (3)/4 1 Non-Residential 45 94 103 263 20 3 11 Residential 77 66 61 120 (4) (3) 8 Other /2 26 18 20 47 (9) 4 10 Total Sales (GWh) /1 193 271 270 528 9 - 8 Losses (GWh) /3 29 75 108 151 Net Generation (GWh) 222 346 378 679 Station Use GWh) 2 3 3 7 Gross Generation (GWh) /1 224 349 381 686 12 3 7 Peak Demand (MW) 41 57 65 112 9 4 6 Annual Load Factor x 62% 70% 67% 70% Losses and Station use as % of Gross Gen. 14% 22% 29% 23% /1 Secondary energy sales to mines excluded; in 1976 these sales were of 6 GWh. /2 Mainly Government usage and street lighting. Apparent decline in sales between 1969 and 1973 is due to re-classification of consumers in 1970, and energy conservation measures in Government offices. /3 Includes technical losses and unaccounted for electric energy. /4 Decline in this category is due to the closure of the LMC's mining operation. Note: ( ) indicates negative figures. The above tabulation shows that electric energy sales to residential consumers decreased in recent years. Such a trend cannot be explained solely by economic recession or tariff increases; it originates mainly in the increasing un- accounted for consumption of energy (reflected in the very high total losses-- 29%--in 1976) which probably took place in the category of residential customers. After taking normal line losses into consideration, the unaccounted for consumption has been estimated at 50 GWh in 1976, representing about 13% of net generation. If this type of consumption is added to residential sales, a more normal growth pattern of 5% per annum results for the period 1969/76. Based on these considerations, residential usage, including illegal connec- tions, is projected at an average annual rate of growth of 5% for the period 1976/85 which results in an 8% per year increase in sales taking into account the projected reduction in losses to 23% by 1985 (see Annex 4),  -7- betmi?antm M 3,eloinm.t Iut.mw^ 2.17 Although several stwdies have bp, q4.#iRAd!4 du ymrs; seetor platining has been poo 4V14 h4 44 Ej j _,eqp systetiattc investment planing hgs w%.qegi1sb r+*en>4B o the Th:tid ?ower Project, finaeed wS.Ithl iW 55%La( tqt8kb ,tSa I Tpermgtjeut planning utit ta.preare *j wtr 4oy t na consulttdta, to t liberia'e fituri 9r te1 s st;r^5 , 2.22). This unit has baen org4v*4 aivA 1.5 s 9it gnA s 2.18 -Pitknced by USAID in JP9653 t; M 2 tdcatdd 25 km northeast of 1ouroQfnrot, R Goq isg4d rn,9