Mali - Economic development in Mali : evolution, problems and prospects (Vol. 3 of 5) : Power and water

R ES T R I CT E D FILE COPY Report No. AW- 14a This rieport wcis prepared for use within the Bank and its affiliated organ They do not accept responsibility for its accuracy or completeness. The rer not bie published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRL:CTION AND DE% INTERNATIONAL DEVELOPMENT ASSOCIATIOI ECONOMIC DEVELOPMENT IN MALI EVOLUTION, PROBLEMS AND PROSPECTS (in five volumes) VOLUME III POWER AND WATER May Z0, 1970 Western Africa Departrnent  EXCHANGE RATES Prior to May 4, 1967 HF 246.853 U.S. $1.o00 MFl1 = CCFAF 1 May 4, 1967 to August 11, 1969 MF 493.706 = U.S. $1.(0 ME 1 = CFAF 0.50 After August 11, 1969 HF 555.419 = uS. $1(.)0 MF 1 CEAF 0.50 Note: Cost and iiavestment figures given in thi's report in Mali francs have not been adjusted for l:he partial devaluation which took place on August 11, 1969. Any dollar equivalents cited are at the previous rate of exchange unless otherwise noted. .. : :~~~~  ECONM'O DEVELOPMENT iN IATLI POWER AND WATER TABLE OF ODNTENTS Page No. MA.P SUMNA RY I. Irntrodnction *********** ****.................... 1 II. Energie du Mali .* ........................... 2 III. TLe Power Market ....... I ....................... 4 A. Historical ....................... 4 B. Future ....*****.*..................... 5 IV. Present Generating and Distribution Facilities .. 6 A. Generation . .... ** ******* ** * *...... . 6, 6 B. Transmission ................ .. . 7 C. Distribution ...............*, 7 V. Future Developments ....................... ,.,. 7 A,. Kenie Rapids ................... 7 Petit Kenie * ....*.... 7 Grand Kenio ... *...................... 8 E,. Sotuba ......... C. Selinguet ............... 9 Sotuba 2 Units .................. ... 9 Sotuba 4 Units .... ....*.......... 10 B. Belandougou .... ...*.... 12 E. Dioila Project ...... 12 F*. Markala .................., 12 G. Tossaye Rapids ........ I..... ....... 12 II. Toubani .............. 12 I. Senegal River Basin ................... 12 VI. Investment Program ............ 13 VII. Financial Situation ........................... 15 A.. Balance Sheets ....*.....* ......... 15 B. Income Statements ............ O.......... 16 C.. Tariffs .. . . ............... 18 D. Taxes . . ............... 19 E. Consumers ....... ....... 19 VIII. Conc'Lusions ........... .... ..... ... O.. 20  ~~~~~~~~- . ~~~~~~~~~~~~~~~~~~~01 I~~~~EPUSLI( OI~~~~~~~~~~~~TMMUCOLI~; ENEW~~~~~JE t~~~~tJ MALI ~~~~~~~DM) A 1 GE R t A~~~~~Tosay ~~ MAR1tALA C~~~~nt~~r~~ servad t2X E DM /~~~~~ ~~JI~~~L.MIi~~~~~~T~~4 6 ~ ~ ~ ~~.q ~~~4~~~'~~vr~GA ~~~~~~~~~~~~~~~~~~~ ti~~~4qi hw~~~~i~ - ~~~ei ~~~w~fa~~OPT K __~~~K I;~ ~ ~ ~ ~ ~ ~~~~~~OT To 0~~~~~~ r! Gouino ~ ~ ~ ~ ~ SK A G~~~~~~~~~~1~~~~~~~~~Ouga~~~~~~~~~~tati ca MARKALA N ?4IAMEY~~~~~~~~~~~~~~~~IPD 269 JANUARY 197  VOLUN3 III ECONOMIC DEVELOPICNT IN 1MALI POIER AND WATER SUGmARY 1. Energie du Mali (EDM) established by the Government of Mali in 1961 with ]participation of Electricite' de lrance (EdF) and the Caisse Central de Coope'ration Economique (CCCE) i; responsible for generation, transmission and distribution of power and distribution of water. Of its present share capital of MF100 million (US'$200,000), 55 percent is owned by the Government, 35 percent by CCCE and 10 percent 'by EdF. 2. EDM presently serves eight independent centers. Installed capa- city totals li7.9 MW of which 5.9 MW are hydro (Sotuba plant of 5.4 MW serving Bamako, the capital, and Felou of 0.5 IV serving Kayes) and 12.0 MW are thermal (diesel). 3. In 1967/68 generation totalled 3j4.2 GWh an increase of 5 percent over the previous year. Of this, Bamako required 28.9 GWh cr about 85 per- cent of all generation in Mali. The average annual growth rate for the period 1962-68 was about 10.3 percent, but in 1965-68 it was only 6.3 percent. 4. The Sotuba hydro plant, commissioned in 1966, was financed with loans and credits to the Government totalling MF4,310 million (US$8.6 million). This plant. is still owned by the Government. 5. EDM from the beginning was faced with financial arLd management difficulties aggravated by the devaluation in April 1967 of the Mali Franc from MF25C) to MF500 to the US dollar. 6. Recognizing EDM's problems, the Government requested EdF to carry out a stucly of ETM's management, organization, accountancy procedures and system, assets valuation, tariff structure, depreciation and staffing poli- cies, and the power market, and to make recormendattions for the transfer of the Sotuba plant to EDI4. Financed by the Fonds d'Aide et de Cooperation (FAC), this stucly is expected to be completed by nid-1970. 7. EDM4's financial situation is complex. P,ower and water operations are not separated adequately. On June 30, 1968 total fixed assets, excluding the Sotuba plant, were valued at I'T3,970.5 million (US$7.9 million) and accumulated depreciation amounted to MF171,93.4 million (US$2 .4 million). Outstanding loans on the same date totalled F1,39?2.-4 million (US$2.8 mil- lion) of which 1MF520 million (US$1.0 million) are short-term debts. 8. It is difficult to determine a mLeaningful rate of return on net fixed assets in operation. An estimate made for the fiscal year 1967/68 indicates that, excluding Sotuba, a rate cf return of about 6.9 percent was earned. Following devaluation the tariffs were adjusted by a surcharge of 47 percen-t for ipower and 50 percent for water. These were, however, put into force after a delay of nine months, so that L967/68 revenues do not fully reflect the surcharge. Estimates made for 1L968/69, with revenues fully reflecting the tariff surcharge, indicate a rate of return, excluding" Sotuba, of about 19 percent or including S'otuba, of about 8 percent.  - ii - 9. Mhe most important issue is arrears. Cumalative gross customer receivables by thes end of 1967/68 totalled MFl,001.'7 million (US$2.0 mil- lion) and equalled about 84 percent of 1967/68 revenues from the sale of power and water. Principal debtors are the municipalities of Bamako and Kayes. 10. An expansion program for 1969-73 foresees total investments of about MF4,442 million (uS$8.9 million). Of this MF2,449 million (Us$4.9 million is needed for water supply; ME1A,749 million (US$3.5 million) for power; and MF21414 million (US$0.5 million) for housing, etc. 11. EHI can finance 58 percent of this program from int;ernal cash generation (HF2,567 million or US$5.1 million). It, has obtained FAG and FED financing in an amount of MF1,265 million (US$2.6 million) and a French supplier' s credit of about MF230 million([JS$0.5 million) for a new diesel unit of 14.5 14W at Bamako. Financing of secondary water distri- bution facilities in Bamako is still to be arranged. (MF300 million or US$0.6 million). No allowance is made in the program for additional thermal facilities thagt may be required in Bamako by 1973 or 1974 or the provision of water supply in certain provincial touns. 12. l'o meet longer-term power demand the Government wants to carry out the SeLingu6 hydro-project on the Sankarani River. Located 140 km. south of Bamako, the Sankarani River forms the boundary between Guinea and Hali. Since Guinea territory would be flooded, imlementation of the Selingue project would be subject to prior agreement with the Government of Guinea. Final decision on the project must in iny event await the completion of detailed studies which, among other 1:hings, should examine the relative merits of hydro and thermal plant, including the need for additional thermal facilities before construction of Selingu5 may be warranted. 13. EMM's future situation will depend on the result of EdF's organization and management study, power market survey and load forecast, and the ability of EDM to implement -the recommendations made. 14. The mission did not consider power projects on the Senegal River or its tributaries which have been under inivestigation within the framework of the Senegal River Basin Study. The ult:Limate justification of any such project is in any event critically dependent on the outcome of studies regarding the possibility of making effect:Lve and economic use of consider- able amount of power and energy that could be generated.  POUTER AND WA'022It I. INTRODUCTIOIN 1. The electrification of Mali began in 1928 with the installation of a 500-klM hydro-.electric unit at Felow near Kayes. In the following years various diesel generating units were installedt at Bamako, Bougouni, Gao, Kayes, Mopti and Segou. 2. Initially the Colonial Authorities. were responsible for public power supply, appointing firms to manage, operate, and maintain generating and distribiticn facilities. Later concessions were granted, first in 1951 to the Energie Electrique d'Afrique de l'Ou.est Frangaise (AOF) and finally in 1957 to the Societe Africaine d'Electricite (SAE). In January 1961, after gaini,ng independence, the Government of Mali took over all power generating, transmission, and distribution, and water distribution facilities. 3. Together with Electricite de Franoe (EdF), and the Caisse Centrale de Cooperation Economique (CCCE), the Governiment then established Energie du Mali (EDM), making it responsible for power generation, transmission, and distribution, and for the distribution of water in the whole of the Republic. w4ith an initial share capital of MF50 million (US$200,000) EDM is owned by the Republic of Mali (55 percent), CCCE. (35 percent), and EdF (10 percent). 4. The concession agreement between the Republic and lsEDN was signed on January 17, 1961 for a period of 30 years up to December :31, 1990. The conditions applying to the concession are cLated August 6, 1962. The faci- lities taken over by the Republic following the nationalization of SAE were placed at EDM?s diisposal against a nominal payment of MI.00 on the condi- tion that 'EDM maintains the facilities and sets up a depreciation reserve for them. 5. In the fiscal year 1967/68, 33.9 GITh were produced.by EDM. Of this amount 27.7 GWh were sold to 14,300 consumers, and 6.2 GWh or 18.3 percent represented transmission and distr:ibution loaesos and auxiliary uses. Maximum demand totalled 7.3 NWJ and the average annual load factor was about 52.5 percent. Installed capacity amounted to 17.9 MW of which 5.9 Ml was hydrc and 12.0 MW thermal (diessl). 6. Bamako, the capital, consumed 23.6 GWh in 1967/68 or about 85 percent of all power requirements in Mali. The number of consumers in Bamako totalled 9,400 or 66 percent of the total. 7. Energy was utilized on average for: i. puiblic lighting and administration 3 percent, iLi. industries and commerce 47 percent, and i:ii. households 50 percent.  -2- ZI ENERGIE DU MI&II * 8. With headquarters in Bamako, ED-I is governied by a Board of seven members elected. for three-year terms. The seven members elect one member to act as president and one or two to act as vice-pr.esidents. The Board * may entrust the management of EDM to a firm or appoint a Managing Director responsible for day-to-day operations. The latter alternative was adopted. The Board appoints or dismisses all employees and fixes their salaries. 9. In accordance with Mali law, EDM is subject to State control by (a) a State Comptroller appointed by the Coumcil of Ministers who is attached to the office of the President of the Repub:Lic, and (b) two or more auditors appointed by thae shareholders for three-year terms, one of whom must be the auditor of the Republic. The Managing Director and the auditors may not be members of Parliament or Government Ministers. 10. A shareholders' meeting is convenad by the Board at least once per year within six months of the close of the fiscal year (July 1-June 30) to approve the balance sheet and income statement; to determine the level of share capital; to fix the dividend rate; and to elect Board members and auditors. 11. EDM's statutes define net income as gross revenue :Less operating expenses, genera:L charges, interest, debt amortization, depreciation and reserves deemed necessary by the Board. After deduction from net income of any losses incurred in previous years any rema:ining profit is allocated to: i) a reserve fund, to which 5 percent of net income is assigned until the fund reaches 10 percent of the share capital; ii) a dividend of 5 percent on the share capital; and iii) a social fund, in an amount determined by the shareholders. Any surplus remaining is used either to create extraordinary reserves, to provide for a pension fund, or to amortize share capital. 12. Since establishment, EDIN has been faced with a number of diffi- culties -- economic, financial and technical. Even before dlevaluation EDM was unable to assure proper maintenance. This sit;uation was aggravated by the devaluation of the Mali Franc in April 1967 from MF250 - US$1 to 17500 = US$1 and the deLay in adjusting tariffs. As a consequence, it was difficult for EDM to prepare financial forecasts and, long-term expansion programs. The major technical and financial problems, however, were solved in that the Fonds d'Aide et de Cooperation (FAC), CCCE and suppliers provided loans and credits to the Government in 1964 to construct the Sotuba hydroelectric plant near Bamako and to modernize the Bamako power distribution system. However, Sotuba, although operated and maintained by EDM, is still owned by the Government since the legal and financial problems involved in the transfer of this plant to EDM have not yet been soLved. Since devaluation the Fonds Europ4en de Developpment (FED) has assured financing of a small water supply project for Tombouctou and has been actively considering a water supply project for Bamako.  - 3 - 13. The Government, recognizing EDM's difficulties, obtained a loan from FAC of ME'29 million (US$58,00o) for a study to review EDM's management and organization. This stiy is being carr:ied out by the Inspection G;ner'ale pour la Cooperation hors Metropole (IGECO), an EdF subsidiary, and is scheduled f'or completion by mid-1970. 14. T'his study will cover the following aspects: i) Organization and management including personnel, salaries, promotions,insurance, and social benei'it policies; ii) accountancy, including procedure and systems review, capa- bility of existing staff, state of existing accounts, meter reading, billing and collection procedures, procedures for dealing with arrears, stores management, and asset valuation; iii) legal aspects of the existing concession agreement; iv) financial implications of a Sotuba transfer; v) power market survey and forecast of demand up to 1980; vi) investment program and financing plan; and vii) tariff review. 15. This study is essential for EDflU's future. If 3an1:/IDA fiLancing is enrivsaed, the TGCO/2d1 report sliould be reviewed by the DankzfD aLd assurancees should be obtained that reccmmeadations leading to efficient and economical operations will be implemented vrithout delay., 16. EDIM is faced wiith a lack of qualified staff espec:Lally in the middle eclhelon positions. There is practically no qualified staff to serve between thie engineers and the workmen most, of whom are illiterate. EDA' s Board recognized the problem early and with the assistance Df EdF/IGECO established a training center. The specif'ic task of this center is to train foremen, electricians and mechanics in a program covering eighteen- month periods. First started in early 1966, two programs have been carried out, the first of which was for electricicms and the second for mechanics. An additional program is planned for worknen whose professional capability cannot be fully utilized, because of their lack of knowledge of the French language. This program would cover linesmnen, maintenance personnel, and diesel mechanics. 17. EDM presently has a staff of about 600 for its power and water services. Thae EdF stuidy will review actual needs and make recommendations on the staff requirements necessary for efficient, operation.  - 4 - TII. TU-E POWER KOIAET A. Historical 18. Generation of power in Mali increased from 18.8 GWhi in 1962 to 33.9 GWh in 1968., increasing at an average annual growth rate of 10.3 percent. * During the sane period installed capacity increaseci from 8.0 MW to 17.9 MW and maximura demand from 4.3 M4W to 7.3 MW. The tab;Le below simmarizes past development by calendar years: 1962 1963 '.964 1965 1966 1967 1968 Generation in GWh 18.8 21.3 25.5 213.0 31.6 33.2 33.6 Losses in G-Wh 3.0 3.4 6.2 6.2 5.2 5.5 5.1 Sales in G'Jh 15.8 17.9 19.3 2.1.8 26.4 27.7 28.5 Growth of sales in percent - 13.5 8.0 13.0 21.0 5.0 3.0 Losses as percent of generation 16.0 16.0 24.3 22.2 16.5 16.6 15.0 Maximum Demand in I