Cameroon - Power Sector Memorandum

CONFIDENTIAL [E COPY Report No. 10574-OA 61 IAL . 10574-CM Type: (SEC) / X34931 / J4067/ AFTIE CAMEROON POWER SECTOR MEMORANDUM May 8, 1992 rgy Operations Division 'entral Africa Department CURRENCY EQUIVALENTe % )ate Currency Unit Franc Communauté Francaise de l'Afrique day 1992 US$ 1.00 = FCFA 275 WEIGHTS AND MEASURES kilometer (km) = 0.624 miles meter (m) = 3.28 feet square kilometer (km2) = 0.386 square miles GLOSSARY OF ABBREVIATIONS kCDI Agence Canadienne de Développement International kLUCAM Société d'Aluminium du Cameroun LAC Ancienne Application Clientèle CCE Caisse Centrale de Coopération Economique 'ELLUCAM Société du Cellulose du Cameroun ICAM Compagnie Industrielle des Textiles du Cameroun IMENCAM Cimentéries du Cameroun E Directorate of Energy DC Electricité du Cameroun NELCAM Energie Electrique du Cameroun DP Gross Domestic Product [V High Voltage .C International Finance Corporation CA Japan International Cooperation Agency fW Kreditanstalt f(ir Wiederaufbau V Low Voltage [INDIC Ministère du Dévéloppement Industriel et Commercial [INFI Ministère des Finances [FPRA Ministère de la Fonction Publique, du Contrôle de l'Etat et de la Réforme Administrative [INMEE Ministère des Mines, de l'Eau et de l'Energie [V Medium Voltage AC Nouvelle Application Clientèle EC National Energy Commission ECO National Energy Conservation Office E Rural Electrification ,DP Société Camerounaise des Dépôts Pétroliers 4H Société Nationale des Hydrocarbures )CATRAL Société Camerounaise de la Transformation de l'Aluminium )NARA Société Nationale de Raffinage )NEL Société Nationale d'Electricité du Cameroun INPAT Ministère du Plan et de l'Aménagement du Territoire EP National Energy Plan FISCAL YEAR July 1 to June 30 CAMEROON POWER SECTOR MEMORANDUM Table of Contents SUMMARY OF FINDINGS v RECOMMENDED PRIORITY ACTIONS viii I. OVERVIEW OF THE ENERGY SECTOR 1. Country Profile 1 - Geography, Topography and Climate 1 - Population I - The Economy 3 2. The Energy Sector 5 - Resource Base 5 - Institutions 6 II. SOCIETE NATIONALE D'ELECTRICITE DU CAMEROON (SONEL) - Evolution of the Power Sector 7 - Legal Status and Fiscal Rdgime 7 - Internal Organization and Management 9 - Staffing and Training 9 In. POWER MARKETS - The Structure of existing Demand 11 - Overview of Sales Statistics 12 - Load Projection to 2004/05 15 IV. POWER SUPPLY 1. Objectives and Strategy 18 2. Existing Supply Facilities 18 - General 18 - The Southern System 19 - The Northern System 20 - The Province de I'Est 21 3. Resources for future Supply 22 4. Planning Issues 23 - Generation 23 - Transmission and Distribution 28 - Summary of the Investment Program .29 This memorandum is based on the findings of a series of sector missions to Cameroon between July 1985 and November 1991. They were staffed initially by Messrs Max Wilton, Principal Energy Economist AFTIE (Task Manager) and Mr. Sergio Contreras, Senior Financial Analyst, now with LA3IE. Mr. Wilton undertook followup missions and updates since 1988 and prepared the memorandum. Mr. lain T. Christie and Mr. Michael J. Gillette are, respectively, the managing Division Chief and Department Director. V. SONEL'S FINANCES - Accounting and Audit 31 - Tariffs 32 - Customer Management 34 - Financial Performance between 1984/85 and 1990/91 34 - Financial Projections to 1994/95 39 VI. SECTOR POLICY ISSUES - Structural Adjustment and Sectoral Performance Contracts 45 - The Aluminium Industry 46 - The National Energy Plan - Phase 1 47 - Issues for Phase 2 of the NEP (Implementation) 48 TABLES AND FIGURES IN TEXT Table 1-1 Population Data 1987/88 2 1-2 Cameroon: National Accounts 4 3-1 Composition of Sales and Generation in 1990/91 13 3-2 SONEL: Evolution of total Medium- and Low-Voltage Sales 14 3-3 SO 7L: Evolution of Low-Voltage Markets 14 3-4 Summary of Load Projections for the Public Sector 17 4-1 Short-term Investment Program for the Power Sector 30 5-1 SONEL: Income Statements 1984-85 to 1990-91 36 5-2 SONEL: Balance Statements 1984-85 to 1990-91 37 5-3 SONEL: Projected Income Statements 1991-92 to 1994-95 40 5-4 SONEL: Projected Balance Statements 1991-92 to 1994-95 41 5-5 SONEL: Projected Funds Flow Statements 1991-92 to 1994-95 44 Figure 4-1 Hydrograph of Sanaga River at Edea 25 iii ANNEXES 1. Administrative Map of Cameroon 2. SONEL Organization Chart 3. Electricity Statistics 3.1 Total Generation and Sales 1978/79 - 1990/91 3.2 SONEL: Regional Distribution of Low-Voltage Sales 3.3 SONEL: Regional Distribution of Low-Voltage Customers 3.4 SONEL: Regional Variation of Consumption per LV Customer 4. Load Forecasts 1990/91 to 2004/05 4.1 Base Case 4.2 High Scenario 5. Existing Facilities 5.1 Hydro Plants 5.2 Reservoirs 6. Southern System 6.1 System Map 6.2 Single-line Diagram 7. Northern System 7.1 System Map 7.2 Single-line Diagram 0. Inventory of Hydro Resources 8.1 Site Locations 8.2 Selected Results 9. Tariff effective 4 September 1989 v SUMMARY OF FINDINGS Institutional Aspects I. The public electricity service in Cameroon is a Government monopoly delegated to concession holders, except for licensed self-generation by captive thermal plants. All concessions, covering the entire country, have been granted to SONEL (paras 2.04 - 2.06). 2. Under the concession system, SONEL has been able to provide electricity to the public without excessive Government intervention in day-to-day operations. Responsibility for investments is divided, without clear rules, between Government and SONEL, to the detriment of accountability, transparency and sound financial management of the sector (paras 2.07 - 2.09). 3. SONEL's internal organization is technically competent but administratively weak, notably in the areas of internal auditing, accounting, informatics and customer management. Staff problems (excess of numbers, skills gaps) are being addressed by attrition, early retirements and training of the personnel retained (paras 2.10 - 2.14). Demand and Supply 4. Power markets and supply facilities are structured around the Southern System (including Yaound6, Douala and Bafoussam), the Northern System ( including Garoua, Maroua and being connected to Ngaounddrd) and the Eastern System under construction (centered on Bertoua). The Southern System also supplies the ALUCAM aluminium smelter and SOCATRAL aluminium fabricating plant, which together absorb over half of Cameroon's almost entirely hydro power production. The aluminium industry, which has special status with regard to tariffs and supply conditions, is not considered part of the public sector power market of SONEL (paras 3.02 - 3.03). 5. The supply - demand balance of the public sector has been assessed as follows: SUPPLY SYSTEMS Southern Northern a t GWh MW GWh MW GWh MW Supply 1991 Systems 4095 570 290 55 16 4.4 ALUCAM Demand 13Q 145 Net Supply Public Sector 2795 425 290 55 16 4.4 *60 *12.0 Actual Demand (1990/91) 1193 224 146 25 12 3.1 Demand (High) 1999/00 2010 379 255 43 24 6.2 2004/05 2690 508 355 60 36 9.1 Demand (Low) 1999/00 1668 315 204 35 19 4.9 2004/05 2065 390 258 44 26 6.6 * Upon completion of Collomines Hydro Project vi 6 Past large expansion of generation and reduced load growth have resulted in a surplus of energy supply that is expected to be absorbed not before 2004/05 in the Southern System and 2001/02 in the Northern System, under an optimistic forecast scenario. This situation provides SONEL with a unique opportunity to develop its markets without incurring new heavy investments in generation. Especially the large urban distribution systems, which had been left behind in the expansion drive of ihe 1970's and 1980's, should be targeted for this policy (paras 4.07, 4.11 - 4.12, 4.32 - 4.34). 7. Cameroon has vast hydro potential, but the resource inventory is being used too much to study new sites that are too large for development in the foreseeable future, at considerable expense of human resources and money. Attention should be shifted to building a portfolio of smaller projects permitting a flexible response to evolving demand. Complementary thermal power, fueled by natural gas, should be included as an option. Over the medium term, the Northern System is most vulnerable because there are no clearly defined supply options (paras 4.21 - 4.22, 4.25 - 4.27). Finance and Tariffs 8. Although SONEL reports regularly to the Board of Directors on its financial affairs, the quality of the accounts leaves much to be desired. The only external audit carried out since the establishment of the utility has revealed many shortcomings and resulted in non-certification of the accounts. Manaatory annual external audits are a high priority (paras 5.01 - 5.03). 9. SONEL's tariffs for the public sector have been determined more by Government policies within a framework of general price controls than by sector needs. Increases were made at irregular intervals, usually under pressing financial circumstances. Nevertheless, improvements have been achieved, especially in the most recent adjustment of September 1989 when the number of rates was greatly reduced. SONEL has also benefitted from some long run marginal cost analysis showing that there appear to be no major distortions in the relative tariffs charged to the different categories of customers. However, this study needs updating to take account of many changes that have taken place since 1986. Taken together with the special rates conceded to the aluminium industry, the current tariff level is adequate for SONEL's revenue requirements (paras. 5.04 - 5.07). 10. A loss level of 24 percent in the public sector, of which at most 14 percent are estimated to be technical and the remaining 10 percent commercial, is indicative of poor customer management. Contributing factors are the old complicated tariff structure, non-performing information systems and widespread illegal connections. Poor collection, even of billed consumption, is evident in the large writeoffs of customer receivables in the last few years (paras. 5.08 - 5.10). 11. Stagnant revenues and rising arrears by Government and parastatals produced a grave financial crisis for SONEL between 1986 and 1989. Helped by a tariff increase in September 1989 and containment of operating costs, the utility successfully resolved its liquidity problems. Real returns on net fixed assets are estimated to be 4 to 5 percent, and financial returns are about 9 to 10 percent. The capital structure is favorable, with a steadily falling debt/equity ratio that stood at 30/70 in mid-1991 (paras. 5.15 - 5.18). 12. The short-term financial outlook is favorable, but SONEL remains vulnerable to disturbing factors outside its control. The poor record of payment of customers in the State and vii parastatal category continues and may lead to a new accumulation of arrears, and the costs of Government-imposed investments that SONEL is obliged to assume A posteriori are unknown negative factors. Moreover, financial strength is imperative because of the special problems posed by financing hydro projects (loan maturities that are short relative to asset lives). On the other . hand, the high level of crmmercial losses suggests much potential for revenue improvement by means entirely within SONEL's control (paras. 5.25 - 5.28). Policy Issues 13. A four-year performance contract, signed between the Government and SONEL in mid- 1989, has been beneficial in settling a number of issues, notably streamlining of the tariff structure, cost containment, restoration of SONEL's financial liquidity, and a beginning of the regularization of the situation with regard to the Lagdo hydro power station that was built for account of the Government in the early 1980's. The contract serves a useful purpose in exercising pressure on both parties to take priority actions and to assess the sector situation regularly. Compliance with the provisions has been only partial. The Government has managed to clear up its stock of debt to SONEL by rescheduling and compensation of cross-debts, but nothing has been achieved on more permanent measures to avoid a repetition of the arrears problem and to clear up the debts of the parastatals and municipalities. SONEL has achieved most of the management performance objectives in the Contract, but little progress is noticeable on management information systems, which are essential to better customer management. A new performance contract to take effect in 1993, should as priorities target the financial measures that were not achieved and the persistent problems of customer malagement and commercial losses (paras 6.03 - 6.07). 14. The aluminium industry, after a 16 percent tariff increase in 1990, continues to make a modest contribution to SONEL's revenues while absorbing about half of the power generated. This situation should not be regardea in a context limited to the power sector. Factors to be considered are Cameroon's competitive position vis-A-vis other aluminium producers in the world, the value added of the industry in the economy, and the future value of the assets built to supply the industry in the 1970's (para. 6.08). 15. Phase I of the National Energy Plan, published by the Ministry of Mines, Water and Energy at the end of 1990, represents an important effort by Cameroon to diagnose the energy sector and to identify its future energy strategy. The document merits a critical review and discussion with the Government and sector entities, with a view to support the preparation of implementation measures under the direction of the Ministry (paras 6.09 - 6.11, 6.24). 16. The issues identified for elaboration during Phase 2 (implementation) are: - Concentration on distribution investments while holding the line on tariffs (para. 6.12); - Reorientation of generation planning: (i) Limited scope investigations of large projects that may attract private financing as enclave projects; and (ii) a more thorough exploration of smaller projects and system improvements that would enable SONEL to respond flexibly to future conditions of demand (paras 6.13 - 6.14); - Some thermal power support should be kept under review as an inexpensive way of firming up secondary hydro generation and to provide some protection of the Southern System against Xv ii extreme droughts; these considerations will become most relevant if other markets for domestic natural gas were to develop (para. 6.'4); - Long-term hydro power development should he safeguarded by timely reservation of lands for storage reservoirs, by declaring the zones to be affected of public utility (par. 6.15). - Social Government objectives, and especially rural electrification, should be considered in conjunction with economic justification of projects as well as financial constraints (paras 6.16 and 6.17); - Prudent financial management of the sector should be safeguarded by -- ling new large Government-sponsored investments and by overhauling SONEL's accountint mnformation- and customer management systems within definite time limits; internal audit procedures should be strengthened and annual external audits made the rule (para. 6.18); - The institutional relationship of SONEI and the State merits a thorough reappraisal, which wcald consider the replacement of the -resent concession system by a public electricity service entrusted to SONEL as an autonomous mixed-economy company, under supervision of an independent regulatory body reporting to the Minister of Mines, Water and Energy (MINMEE). New legislation should envisage the option of private capital participation in SONEL or any subsidiaries that might be established in the distribution sector (paras 6.19 - 6.23). RECOMMENDED PRIORITY ACTIONS 1) Government Actions 1. Conversion of SONEL in a Socidtd d'Economie Mixte replacing the concession system. 2. Establishment of an independent National Energy Board charged with regulating the sector under the Minister of Mines, Water and Energy. * 3. Administrative measures to ensure correct budgeting and prompt payment of electricity bills by central and local Government entities and parastatal enterprises. * 4. Completion of transfer of power sector assets built by the State to SONEL and settlement of associated financial obligations and operational responsibilities. 5. Establishment of a National Energy Conservation Office. SONEL's General Management 6. Strengthening and centralizing internal controls under the Direction Gdndrale. * 7. Establishment of an operational customer management system with precise implementation deadlines. * 8. Continuation of staff reductions, in conjunction with manpower and training programs. 1) Actions marked * are recommended for inclusion in the next performance contract ix Recommended Priority Actions (cont'd) 1) SONEL's Financial Management * 9. Adoption of mandatory annual external audits by an international accounting firm. 10. Implementation of agreed reforms recomme ided by the auditors. * 11. Reduction of commercial losses in the public sector following pre-established targets. 12. Updating ot the tariff studies when comp!ementary stuJies on demand and investment programs are available. inv=sments * 13. Completion of the transmission and distribution facilities of the Eastern System, together with the thermal generation facilities at Bertoua. * 14. Study of the optimum timing of the Collomines Hydro Plant and Transmission before a final commitment to construction is made. * 15. Implementation of the Urban Distribution Project of Douala. Planning 16. Launching or completion of the following studies of priority projects: Generation: * - Compensation basins in the Sanaga Valley upstream of Song Loulou; * - Feasibility of the Ndj6k6 Storage site in the Sanaga Basin; - Exploration for high-head hydro sites in Western Cameroon as sources of peaking capacity; - Study of the economics of complementary thermal power for the Southern System; - Identification of future reservoir sites to be protected from uncontrolled settlement. Transmission - Study of the feasibility and economics of interconnecting the Northern System with Chad. Distribution - Planning of staged implementation of the project "Densification des Rdseaux du Litoral, de I'Ouest et du Sud-Ouest"; - Establishment of technical, economic and financial criteria for rural electrification projects. 1) Actions marked * are recommended for inclusion in the next performance contract I. OVERVIEW OF THE ENERGY SECTOR 1. COUNTRY PROFILE Georaphy. Topography and Climate 1.01 Cameroon's territory of 465,400 km' forms an irregular wedge, beginning with a 250 km long coastline at the southern part of the Gulf of Guinea and extending about 1050 km northeastward to Lake Chad, and about 650 km due east to reach the headwaters of the Congo River. The country borders on Nigeria in the Northwest, on Chad and the Central-African Republic in the East, and on successively Congo, Gabon and Equatorial Guinea in the South (Annex 1). The administrative divisions comprise 10 provinces and 49 departments. 1.02 The dominant element in the relief is a central mounta.' -ange extending from the coastal region North of Douala towards Ngaounddrd and ending at about the halfway-point of the 1200 km long eastern border (Annex 8.1). Elevations in this area vary from 1000 m to a maximum of 4070 m (Mount Cameroon). North of this mountain range, the plains of Garoua are drained by tributaries of the Benoud River. The narrow wedge in the extreme North is part of the Lake Chad drainage basin. Going northward, the vegetation in this region changes gradually from woodland savanna to sahelian. South of the mountain range a series of vast forested plateaux slope gently southeast, but they are traversed by major rivers (Sanaga, Nyong, Ntem) flowing east-west to discharge in the Atlantic Ocean. Going southward, the wooded savanna Ihanges to humid mixed forests and next to equatorial rainforesst near the southern border, and mangr)ve swamps along the coast. 1.03 The climate of Cameroon is determined in principle by the seasonal North-South movements of the Intertropical Front forming the boundary between a mass of continental hot and dry air of the Sahara flowing towards the Equator (the "harmattan") and a mass of instable, humid maritime air advancing from the Southwest (the anti-cyclone of St. Helena). The interaction of these air masses produces, broadly, three types of climate as a function of latitude: (i) the tropical regime in the north, with a single rainy season and most precipitation occurring in July, August and September; (ii) the transition regime characterized by two rainy seasons (May-June and September-November) but with some precipitation in the intervening months; and (iii) the equatorial regime with two rainy and two dry seasons. Most of the interior of Cameroon is under the influence of either the tropical or the transition regime. North of Ngaounddr6, the tropical pattern dominates, with, annual rainfalls of 1400 mm in the northern plains and diminishing to 600 mm in the Lake Chad Region. In the central and southern plateaux, the rainfall increases to 1700 mm. The mountains in the West and Northwest modify this pattern: humid equatorial air striking from the Gulf of Guinea produces heavy rainfalls in the coastal region ranging from 2500 -owards to 7500 mm. Population 1.04 The most recent, unpublished, national census of 1987 indicates a population of 10.5 million. Relative to the preceding census results of 1976, the average annual growth rate is 3.59 %, but this high number may result from an underestimate in the 1976 base. According to analyses by the Ministbre du Plan et de I'Am6nagement du Territoire (MINPAT), the probable current growth rate is 3.26 % per year until the year 2000; the corresponding estimate for 1991 would be about 12.2 million. Table 1-1 shows the total and urban population by provinces for the fiscal year 1987/88. The density varies widely: 72 % of the total population is concentrated TABLE 1-1 CAMEROON Population Data 1987188 PROVINCE CAPITAL AREA POPULATIOA DENSITY DISTR. URBAN POPULATION thou.sq.km thou. no/sq.km % thou. % of total Extreme-Nord Maroua 34.3 1777 51.8 16.03 186 10.4 Nord Garoua 67.8 626 9.2 5.65 108 17.2 Adamaoua Ngaoundéré 62.0 437 7.0 3.94 100 22.8 Centre Yaoundé 68.9 1871 27.1 16.88 967 51.7 Sud Ebolowa 47.2 420 8.8 3.78 112 26.7 Est Bertoua 108.9 492 4.5 4.44 121 24.5 Littoral Douala 20.2 1834 90.7 16.54 1497 81.6 Nord-Ouest Bamenda 17.3 1259 72.8 11.36 224 17.8 Ouest Bafoussam 13.9 1512 108.8 13.64 422 27.9 Sud-Ouest Buea 24.9 858 34.4 7.74 393 45.8 TOTAL 465.4 11086 23.8 100.00 4127 37.1 MAJOR URBAN CENTERS Yaoundé 648 Douala 812 Bafoussam 111 Bamenda 109 Garoua 141 Maroua 122 Sources: Plan Energétique National, déc.1990, Vol. 1, Tableau 3 MINPAT 3 in the one third of the national territory comprising the Extreme North, Center (including Yaound6), Littoral (including Douala) and the three northwestern provinces. 1.05 Rapid urbanization is a major factor in the development of Cameroon, with all the implications for infrastructure, employment, social services and essential needs such as potable water and energy. Unfortunately, the long intervals and the statistical uncertainties of the national census create considerable difficulties in tracing a dynamic historical evolution, and extrapolating past trends is prone to errors. For the statistical base year 1987/88, the urban population is estimated to comprise 37 percent of the total. According to the National Energy Plan (NEP), the population of Yaound6 and Douala is projected to grow at 7.8 % per year until 2010. Although such high growth rates have occurred in the past, their continuation over almost a quarter of a century seems unlikely in view of the experience elsewhere l/. For the purpose of assessing growth of electricity demand, this report uses an urban population growth of 6.2 % to the year 2000 and 5.5 % in the following ten years, in conjunction with the overall rate of 3.2 % to 2000 and 2.8 % thereafter. The Economy 1.06 Historically, agriculture has been the backbone of the Cameroonian economy. In the aggregate, it assures the country of zelf-sufficiency in food and it is a substantial contributor to export earnings. The economy of the North is based on livestock herding, cotton and cereal; in the Center and East cacao and tobacco are the main export crops; coffee plantations are found in the highlands around Bamenda; the coastal zone is the center of rubber, oil palm, pineapple and banana plantations, of the timber and logging industry, and of fishing activities. 1.07 The manufacturing sector produces import substitutes and agro-industrial and wood-based exports. The sector is structurally still weak, as evidenced by the large volume of semi-processed goods that is imported. Artificial stimulus of import substitution, followed by depressed domestic demand and a general lack of competitiveness have all contributed to a rather depressed state of industry. Since about 70 % of all manufacturing activity is concentrated in the Douala region, the fortunes of industry have a pronounced local impact. 1.08 The tertiary sector is dominated by public administration and para-statal entities which indirectly, because of stifling regulation, have often impeded the efficient functioning of the private service sector. 1.09 Despite the negative factors present since independence, Cameroon's economy showed vigorous growth in the 1960's and 1970's, with GDP growth in real terms reaching 8 % per year. The discovery of commercially exploitable oil in 1978 gave the economy a new impetus. The rapidly growing share of oil production in GDP diminished the relative importance of the other sectors but the new sources of State revenues were employed in an attempt to redress imbalances in the economy and to address perceived priorities of development. These efforts met only mixed success, mainly because of the continuing heavy reliance on State intervention. Excessive expansion of employment in the civil service and parastatals and poorly targeted investments progressively weakened the public finances and the non-oil economy. The successive collapse of the international price of crude oil and of the prices of major export commodities such I/ See for example the World Bank publication "Urban Policy and Economic Development - An Agenda for the 1990's", p.20. q TABLE 1-2 CAMEROON: NATIONAL ACCOUNTS (a) GDP COMPOSITION BY SECTORAL ORIGIN Current FCAF Distribution (billions) (percent) FISCAL YEAR 84/85 87/88* 84/85 87/88 Agriculture, forestry, fishing 790 1100 20.1 33.2 Manufacturing, power & water, 687 860 17.5 19.9 construction Commerce, transport, banking, 1264 845 32.2 25.5 communications Public administration and 292 355 7.4 10.7 other services Import duties 121 120 3.1 3.6 Subtotal non-oil economy 3155 3080 80.4 93.0 Oil sector 768 231 19.6 7.0 TOTAL GDP 223 3311 100.0 100.0 * Estimated (b) GDP GROWTH 1979-1989 (FCFA of 1980) Growth Rates CALENDAR YEAR 1972 124 1989 79-84 84-89 Agriculture 403 516 540 5.1 0.1 Industry** 304 777 543 20.6 -7.0 Services 649 780 926 3.7 3.5 TOTAL GDP 1356 2073 2009 8.9 -0.1 **of which: Mining,petroleum 75 377 174 38.0 -14.3 Manufacturing 113 233 262 15.6 2.4 5 as coffee and cocoa revealed the vulnerability of Cameroon beneath the apparent oil wealth. A growing crisis in the balance of payments and in public finances prompted the Government in 1988 to seek assistance of the donor community to support the now ongoing structural adjustment program. 1.10 The impact and subsequent fallout of these events is illustrated by some macro- economic statistics in Table 1-2. Their value is somewhat diminished by data problems and long delays in compilation, making it necessary to resort to different sources. The upper half illustrates the changing composition of GDP between 1984/85 (when oil revenues reached their highest levels) and 1987/88 (when major declines of export commodity prices had largely run their course). The lower half indicates growth trends between 1979 and 1989. Again, the impact of the oil boom and the following decline is striking, with corresponding effects on the manufacturing sector. The effect of the drastic decline in non-oil commodity prices on agriculture is quite evident. Only the service sector appears to have weathered the shocks of the decade of the 1980's relatively well. 2. THE ENERGY SECTOR Resourcet Base 1.11 Cameroon's topography and climate make the country one of the richest in the world in hydroelectric potential. At least 100,000 GWh of primary energy is considered economically attractive, which contrasts with a current generation of about 2700 GWh per year. Consequently, thermal power plays only a minor, transitory role in isolated load centers, until their connection to the main grids can be justified. 1.12 The discovery of commercial petroleum deposits in 1978 gave rise to high hopes for a broadly diversified resource base. However, proven reserves, located offshore between Victoria and insular Equatorial Guinea, turned out to be disappointingly small - of the order of 70 million tonnes -although not inconsiderable in relation to domestic consumption of about one million tonnes per year. Production for export rose rapidly to reach a peak of 8.4 million tonnes in 1987/88. Even with declining production rates, the remaining existing reserves will be depleted by the turn of the century. Therefore, future domestic needs alone should prompt an intensive exploration for new reservoirs, under an appropriate and competitive framework of incentives. Based on current data, it would appear that the role of crude oil as a major earner of foreign exchange is transitory, and that future economic development should be based on a return to and strengthening of Cameroon's traditional export sectors. 1.13 In the process of exploration for oil, considerable reserves of natural gas were discovered. The largest deposits of non-associated gas, totalling 110 billion cubic meters, are located offshore in the Douala and Rio del Rey Basins. Furthermore, the producing oil fields hold about 20 billion cubic meters of associated gas, most of which is flared. These reserves are large both in absolute terms and relative to eventual domestic needs but, given the proximity of Nigeria's vast reserves, the prospects for gas exports are not good. On the domestic side, the problem is how to develop an initial market large enough to make gas development economically attractive. In that respect, natural gas faces two obstacles: (i) in the power sector, it must compete against inexpensive and abundant hydro power;and (ii) in the industrial sector, gas should in principle be competitive, but it would displace fuel oil of low economic value produced already in excess by the domestic refinery at Limbd, North of Douala. The marketing of associated gas now seems doubtful because of the rapid decline of petroleum production. 6 1.14 In the aggregate, Cameroon is rich in biomass resources providing the basis for important export earnings of timber and for the supply of traditional cooking fuels to households. However, the diversity of the climate is reflected in a very uneven distribution of the resource. An - incomplete - forestry inventory has identified 17.4 million hectares of dense forest in the humid tropical regions of the South, 1.5 million hectares of clear forest and 6 million hectares of forested savanna and dense brush land 2/. The annual rate of clearing is roughly estimated at 200,000 hectares, of which half in the ecologically more fragile North. Since regeneration and replanting add up to less than 35,000 hectares per year, there is clearly a major supply-demand imbalance, especially when the numbers are disaggregated. As elsewhere in Subsaharan Africa. deforestation is a problem to be addressed in a multisectorial context involving, besides energy, aspects of agriculture, population, land management and environment. Institutions 1.15 The Ministbre des Mines, de l'Eau et de l'Energie (MINMEE) is responsible for formulation and implementation of national energy policy and the supervision of State or State- dominated public enterprises. An exception is SNH (see below), which reports directly to the Presidency. Other ministries have specific fields of jurisdiction, of which the principal ones are: - energy pricing, Ministbre du Ddveloppement Industriel et Commercial (MINDIC); - external financing, Ministbre du Plan et de l'Am6nagement du Territoire (MINPAT); - debt service, Ministbre des Finances (MINFI); and - supervision of financial management of state enterprises, Ministre de la Fonction Publique,du contr6le de l'Etat et de la R6forme Administrative (MFPRA). 1.16 The most important public enterprises, either wholly-owned or majority-owned by the State, are: - for electric power: Socidt6 Nationale d'Electricit6 du Cameroun (SONEL); - for petroleum and gas exploration and development: Soci6t6 Nationale des Hydrocarbures (SNH); - for petroleum refining and product imports: Soci6td Nationale de Raffinage (SONARA); and - for petroleum product storage: Soci6td Camerounaise des Ddp8ts Pdtroliers (SCDP). On the side of the private sector, three multinational oil companies hold minority interests in SNH and SONARA, and six (including SONARA's shareholders) are engaged in petroleum product distribution. 1.17 It should be noted that the foregoing activities cover electricity and hydrocarbons. As far as the energy aspect of biomass is concerned, there still exists a legislative vacuum on the supply side, but a new forestry code is being prepared. Z/ National Energy Plan, Final Report, p. 28 7 II. SOCIETE NATIONALE D'ELECTRICITE DU CAMEROUN (SONEL) Evolution of the Power Sector 2.01 Electrification in Cameroon started before World War 11 in Douala, Yaoundd, and a few secondary centers. While Government granted concessions to private enterprise in the primary centers, it retained full jurisdiction over the development and management of secondary centers. In 1948, Energie Electrique du Cameroun (ENELCAM) was created as a mixed- ownership utility to build and operate the first, at that time large, hydro power station of 22 MW (Edea I), located on the Sanaga River some 70 km southeast of Douala. In 1953, ENELCAM's operations were extended to include power distribution operations in Edea and Douala. 2.02 In 1955 the stage was set for a major expansion when the Socidtd d'Aluminium du Cameroun (ALUCAM), an affiliate of the Pechiney-Ugine Group, decided to build an aluminium smelter having a capacity of 45,000 tonnes/year and requiring about 80 MW of dependable capacity. The smelter was located adjacent to the Edea site where,between 1955 and 1958, ENELCAM increased the installed capacity by 136 MW (11 MW at Edea I and 125 MW at the new Edea II plant) to supply the smelter and the growing public system. 2.03 A few years after Cameroon's independence, in 1963, the Government formed a new mixed-ownership utility, Electricit6 du Cameroun (EDC), to take over all public sector electric utility operations in the country except generation at Edea, which ENELCAM continued to manage. The takeover process took seven years (1964-1971), during which EDC also extended electricity service to an additional 17 cities and 8 villages. In parallel, ENELCAM increased Edea's capacity by 104 MW (Edea III), and the company built two dams upstream (at Mbakaou and Bamendjin) on tributaries of the Sanaga River to provide partial regulation and thus to increase the guaranteed supply to the Douala-Yaoundd system. The final consolidation of the power sector took place in 1974, when the Government merged ENELCAM and EDC into the Soci6td Nationale d'Electricit6 du Cameroun (SONEL). Legal Status and fiscal Regime 2.04 SONEL, formally established in May 1974, holds the concession of public electric power supply in Cameroon for 40 years. In addition to this basic objective, the statutes include a mandate to engage in industrial, commercial and financial activities related to generation, distribution and utilization of electricity. Therefore, potentially SONEL could play a role in industrial development and energy conservation. The current capitalization is FCFA 30 billion. The Government owns 93.9 % of the shares and the Caisse Centrale de Coopdration Economique (CCCE) virtually all the remaining 6.1 % . The company is governed by a 12-member Board of Directors, 10 of which (including an ALUCAM representative) are appointed by Government and two by the CCCE, for three-year renewable terms. The Board appoints the General Manager and one or two Assistant General Managers,it sets general policies and it must approve investment programs, operating budgets, long-term contracts and tariff proposals. MINMEE e) cises overall supervision through its Directorate of Energy. Investment projects must be dpproved by MINPAT, and tariff proposals are submitted to Government via MINDIC. The General Manager is responsible for day-to-day operations. 2.05 In 1974, SONEL inherited all public and private domain assets of ENELCAM and EDC, i.e.: 8 (i) three generation concessions of ENELCAM for the operation of the Edea 1.11 and III power stations and the two upstream regulating dams at Mbakaou and Bamendjin. (ii) the transmission concession of EDC for power deliveries from Edea to Yaound6: and (iii) four distribution concessions of EDC covering Yaoundd, Douala, Garoua and the (grouped) secondary load centers, and the former Edea-Dschang distribution concession of ENELCAM. 2.06 Following the adoption of a new Electricity Law (No. 20 of November 26, 1983), SONEL received additional concessions for generation at a new hydro generating plant of 392 MW at Song-Loulou, upstream of Edea, and for distribution in the northwestern and st>uthwestern provinces, thus completing country-wide coverage. The most recent addition to SONEL's assets is a third regulation dam, Map6, located on the M'Ban tributary of the Sanaga River. The only remaining anomaly in SONEL's assets is the Lagdo Dam and power station in Northern Cameroon. This multi-purpose turn-key project was built by the Chinese cooperation between 1976 and 1982 for the Government of Cameroon. SONEL received the operating responsibility provisionally. The full transfer to SONEL is being prepared as one of the Government obligations in the current performance contract for the sector. The plant and transmission were transferred to SONEL's property account in FY 1987/88, with a corresponding increase of the equity account. The settlement of responsibility for the debt service (until now assumed by Government) and for the multipurpose operation is still outstanding. Including Lagdo, net fixed operating assets of SONEL in mid-1991 stood at FCFA 235 billion ( US$ 850 million equivalent). Law No 79/14 of June 30, 1979, grants SONEL for 25 years exemption from a broad array of direct and indirect taxes, import duties and any new tax that may be created in the future. 2.07 The concession system was conceived in colonial times to mobilize private capital for public utility financing, while the State retained a large degree of control in the public interest. SONEL, apart from CCCE's minority interest, is virtually a State-owned company. In such a situation the concession system in its present form looses its significance because the State acts both as concession-granting authority and as concessionaire. If managed according to the original rules, the concession system becomes extremely cumbersome: the concessionaire must keep two categories of assets on the books with different rules for depreciation and renewal, multiple concessions have each their own conditions of service and tariffs, and the responsibility for planning and implementation of investments is in effect split between the governing authority and the concessionaire. These factors tend to obscure the economic rationale for investment decisions and the financial performance of the sector. On the positive side, the division of responsibilities tends to shield utility management from excessive Government interference in day- to-day operations. 2.08 In practice, SONEL has not suffered unduly from the disadvantages of the concession system. Although assets are still divided between public and "private" domain, they are shown as one ensemble on the balance sheet. Double depreciation of assets in the public domain has been eliminated. The latest tariff revision of September 1989 ended a proliferation of rates for the different concessions that greatly complicated customer management. The utility enjoys a substantial degree of autonomy in its daily operations as well as in the construction of new facilities. However, in matters of investment planning and, by extension, financial management and tariff policy, Government decisionmaking imposes important restrictions that are not in the collective interest. 9 2.09 The concession philosophy is still evident in the distinction between two categories of investments. The "normal" investments, of the order of US$ 10-15 million per year. comprise modest improvements and system extensions that are planned annually and submitted to the Board of Directors for approval. The Government considers the "extraordinary" investments, forming the core of the system expansion programs, its direct responsibility. Although SONEL has an important role in their preparation and construction, the decision-making process and the arrangement of external financing stay essentially in the realm of politics. Since SONEL cannot be held responsible for the consequences of such decisions, the utility can always appeal for support of Government in difficult times. This dualistic approach to planning of major investments undermines the accountability and autonomy of SONEL, and it detracts from the authority of the Board of Directors. Internal Organization and Management 2.10 As shown in the organization chart of Annex 2, SONEL is organized along customary functional lines (seven technical, administrative and financial departments) and by five geographic divisions that follow provincial boundaries. The decentralized operations are managed by regional directors, while communication with the functional departments is assured in each regional department by three "attach6s" responsible for generation, transmission/distribution and administration. The structure is strongly hierarchic, with extended delegation of responsibilities, but also a strong autonomy of each department that at times impedes cooperation on matters of common interest. Weak points in the organization are the internal audit functions and informatics. 2.11 The inspection functions are attached partly to the Direction G6n6rale (general inspection), partly to the Direction Comptable et Financibre - DCF (accounts inspection), and partly to the Direction des Etudes Gdndrales - DEG (management audits). Because of the strong autonomy of each department, inspectors of DCF and DEG are not perceived as exercising a corporate function, and their effectiveness is diminished accordingly. It should also be noted that the attachment of procurement functions to the finance department holds the potential for conflicts of interest and is bound to diminish the effectiveness of internal controls. 2.12 The efficient operation of the Informatics Department is hampered by the lack of interdepartmental cooperation. Applications in the central department are developed without sufficient consultation with potential users, and other departments with their own agenda have a tendency to go their own way in information management, both in procurement of computing equipment and in the development of applications. Since at least 1985, management and donors have attempted to streamline systems and procedures, but progress is slow. This situation has had most negative consequences for customer management, which leaves much to be desired and is causing rising losses (see also par. 3.04). Staffing and Training 2.13 Between 1975 and 1989, SONEL's staff grew from 1483 to 4234, an average growth of 7.8% per year. Until 1984, sales and number of customers increased at rates of 12- 13% per year, and further strong expansion was expected at that time. In more recent years, from 1984 to 1989, under the influence of drought and economic recession, demand growth slowed to 6.3 % but staff numbers rose disproportionately. The performance contract between Government and SONEL, signed in June 1989, obliged SONEL to freeze the staff numbers at the 1989 level for the next four years. Actually, the company has done better, and reduced its staff to 3743 in mid-1991, mostly by early retirements and attrition. Since half of SONEL's 10 output is delivered directly from the generator terminals to the ALUCAM smelter, the desirable staff level should be judged essentially on the basis of the service rendered to-the public sector. Comparison with other African utilities suggests that the target should be in the 2500-3000 range. If SONEL continues its present policies, it should be able to achieve the efficiency objective in the foreseeable future, without severe social repercussions. 2.14 Over the years, SONEL has had considerable success in improving staff quality and in acquiring new skills, as illustrated by the following statistics: 1977/78 1983/84 1990/91 Total % Total % Total % Higher level 136 6.7 293 8.6 380 10.2 Foremen, skilled labor 420 20.5 821 24.1 1037 27.7 Unskilled labor 1484 72.8 2302 67.3 2324 62.1 TOTAL 2040 100.0 3416 100.0 3743 100.0 Since 1983/84, in-house vocational training is provided at a Centre de Formation Professionnelle at Omb6, and supplemented by brief training courses abroad and correspondence courses. SONEL's instructors receive special pedagogic training courses. The utility promotes higher level training by granting scholarships to promising students to pursue their studies initially at universities in Cameroun. Many SONEL engineers have completed their higher level education abroad, with external financing from Canada and France. The number of expatriates in the company has been reduced from 42 in 1985 to 13 in 1991. Although the percentage of higher level staff approaches that of utilities in Europe and North America, it should be recognized that, in a relatively young company like SONEL, promotions on the basis of seniority are inevitable. The continued upgrading of the quality of higher level staff remains a priority. 11 111. POWER MARKETS The Structure of existini Demand 3.01 SONEL's clientle comprises the usual categories of electric utility customers throughout the national territory, and a few large industrial complexes supplied directly from the high-voltage transmission grids. Prominent in the latter group are the aluminium smelter (ALUCAM) and associated fabricating plant (SOCATRAL) at Edea which, together, absorb over half of the electric power generated in Cameroon. A paper mill (CELLUCAM), which started operations at Edea in 1980, was also supplied at the 90 kV voltage level. However, after a few years CELLUCAM ran into financial difficulties and it shut down in 1988; the remaining minor electricity consumption serves only to power the site maintenance facilities. Because of the special arrangements made over the years to serve the aluminum industry, ALUCAM and SOCATRAL are regarded as a complex outside the markets of the public sector; the latter are also known as the "concessions". 3.02 Table 3-1 shows the current structure of the power markets, illustrated with the statistics for FY 1990/91 (ending June 30). SONEL's service to the public sector is geographically organized by the five "directions r6gionales" (DR) shown in Annex 2, each comprising one or more provinces. The most important ones are DRCSE, grouping the provinces of the Centre (including the national capital Yaoundd), Sud and Est, and DRLO, grouping the provinces of the Littoral (provincial capital Douala) and Ouest. The country is far from fully electrified; the zones already having access to power are mostly supplied from two major interconnected systems. The Southern Interconnected System provides service to roughly an L- shaped area with the legs extending from Douala eastward to Yaoundd and northward to Bafoussam and Bamenda. The Northern Interconnected System supplies the provincial capitals Garoua and Maroua and surrounding smaller towns and villages. Of the electricity in the medium- and low-voltage markets (totalling 970 GWh), only three percent is sold in isolated centers. They are concentrated in the Province de I'Est (the provincial capital Bertoua and surroundings), the Province of Adamaoua and the town of Kousseri on Cameroon's most northern border with Chad. 3.03 The wholesale customers noted above (ALUCAM, SOCATRAL and CELLUCAM) are located on the northern shore of the Sanaga River near Edea, opposite the Edea hydro power station. Because of this location, SONEL's wholesale deliveries at Edea, accounting for over half of total production, entail very low system losses; in fact, a large proportion of Edea's generation is fed (at 10.3 kV) directly to the rectifiers of the ALUCAM smelter. Elsewhere in the Southern System, the CIMENCAM cement plant near Douala is supplied from the grid at 90 kV. The Northern System feeds the CICAM textile mill directly from the Lagdo Hydro plant, at 110 kV. Wholesale deliveries made up about 59 % of SONEL's sales in FY 1990/91. The International Finance Corporation (IFC) holds a small equity interest in ALUCAM and it has supported CICAM with a loan. 3.04 The generation of 2708 GWh is virtually all hydroelectric, with the output of isolated diesel plants accounting for less than 1.5 % of the total. In the aggregate, system losses are equivalent to 13.2 % of generation, but this favorable indicator is deceptive. Since over half of SONEL's output is delivered wholesale in Edea, where the industrial customers are located practically next to the power station, most of the losses are incurred in the public sector. Anne 3.1 shows the estimated losses in the public sector since 1978/79. The numbers are derived on the assumption that the losses associated with service to the three Edea wholesale customers are 12 two percent of the energy delivered. The remaining losses in Col.(10) are computed as a percentage of the remaining generation for the public sector. The resulting 24.4 % for 1990/91 is indicative of a very high level of commercial losses, even after making allowance for any special circumstances responsible for technical lossesj/. Another disquieting aspect is the trend: losses in the public sector have risen steadily from 14.3 % in 1980/81 to the present 24.4 %. 3.05 The National Energy Plan4/ estimates that on average about 15 % of Cameroonian households have access to electricity; in rural areas the ratio falls to 4.2 %. The report adds the the average access ratio rises from 15 to 23.5 % if illegal connections are taken into account. This extraordinary difference raises the question where the losses originate. One often heard explanation is that pent-up demand is satisfied by improvised and primitive illegal connections. This has the double effect of increasing technical losses, voltage drops and high outage rates throughout the networks, and of increasing commercial losses because of clandestine consumption. Although these elements no doubt play a role, it would seem that the NEP attributes the problem mostly to the low-voltage clientle. Experience in other countries shows that fraud among medium-voltage customers, often much more sophisticated, can account for a significant sbare of the losses. This aspect deserves to be further examined. 3.06 The system peak loads in the Southern Interconnected System are evaluated separately for the ALUCAM/SOCATRAL load and for the public sector. The aluminium industry is entitled to 145 MW firm power, which may be raised to 165 MW of firm and non-firm power. The public sector peak load in 1990/1991 (non-coincident) was 224.9 MW. During the same year the Northern Interconnected System reached a peak load of 20.6 MW. The corresponding annual load factors are 0.605 for the Southern and 0.j70 for the Northern System. Overview of Sales Statistics 3.07 Table 3-2 shows the longer-term trend of low- and medium voltage sales over the last twenty years,at five-year intervals. The following aspects should be noted: (1) The growth rate of total sales has steadily declined since 1984/85; (2) Medium-voltage sales grew fastest until the beginning of the 1980's; since then they registered a prolonged decline ending in negative growth; (3) Low-voltage sales rose fastest in the second half of the 1970's and then declined, although maintaining positive growth rates; (4) The number of low-voltage customers increased more rapidly than sales. One can infer that there is continued pent-up demand for electricity service, but falling individual incomes result in lower consumption per customer. 3.08 The more recent evolution of the low-voltage market is highlighted in Table 3-3. The table shows data from the last twelve years (1978/79 to 1990/91); in this series, the last year in which public sector sales still increased, being 1987/88, was taken as a breakpoint to compute I/ The National Energy Plan makes the same point, see Volume 1, p. 47 A/Volume 1, p. 61 TABLE 3-1 CAMEROON POWER SECTOR COMPOSITION OF SALES AND GENERATION IN FY 1990/91 1. Low- and Medium Voltage Sales Region Southern Interconnected Isolated Total Sales System Load Centers LV MV Total LV MV Total LV MV Total DRCSE 161.4 106.9 268.3 8.0 2.3 10.3 169.4 109.2 278.6 DRLO 318.3 220.5 538.8 0.4 0.0 0.4 318.7 220.5 539.2 DRSO 23.9 22.4 46.3 0.3 0.0 0.3 24.2 22.4 46.6 DRNO 12.2 3.3 15.5 0.0 0.0 0.0 12.2 3.3 15.5 Subtotal 515.8 353.1 868.9 8.7 2.3 11.0 524.5 355.4 879.9 Northern Interconnected System DRNEA 36.2 36.4 72.6 12.7 4.6 17.3 48.9 41.0 89.9 TOTAL 552.0 389.5 941.5 21.4 6.9 28.3 573.4 396.4 969.8 2. System Loads Southern System Northern System Isolated TOTAL LV/MV Sales 868.9 72.6 28.3 969.8 Special HV Customers: CIMENCAM 26.1 CICAM 22.4 ALUCAM 1317.8 SOCATRAL 12.5 CELLUCAM -2.7 1359.1 22.4 1381.5 Total Sales 2228.0 95.0 28.3 2351.3 Losses 325.3 25.9 5.2 356,4 Generation: Hydro 2549.6 119.8 0.0 2669.4 Thermal 3.7 1.1 33.5 38.3 Total 2553.3 120.9 33.5 2707.7 Public System: Energy 1192.8 120.9 Peak 224.9 MW 20.6 MW Load Factor 0.605 0.670 TABLE 3-2 SONEL: EVOLUTION OF TOTAL MEDIUM & LOW VOLTAGE SALES Fiscal Total Medium Lo w V o 1 ta q e year sales voltage Sales Customers Cons. per cust. GWh GWh GWh thousands kWh 70/71 172.4 82.2 90.2 N.A N.A 75/76 313.1 164.4 148.7 67.6 2200 80/81 585.0 302.8 282.2 132.8 2125 85/86 950.7 472.1 478.6 234.8 2038 90/91 969.8 396.4 573.4 338.0 1696 Averacge annual Growth Rates (percent) 71-76 12.7 14.9 10.5 N.A N.A 76-81 13.3 13.0 13.7 14.5 - 0.7 81-86 10.2 9.3 11.1 12.1 - 0.8 86-91 0.4 - 3.4 3.7 7.6 - 3.6 71-91 9.0 8.2 9.7 11.3* - 1.7* * 75/76 to 90/91 TABLE 3-3 SONEL: EVOLUTION OF LOW VOLTAGE MARKETS Division Fisca 1 Years Growth (%) 78/79 87/88 90/91 78/79 87/88 to to 87/88 90/91 1. SALES (GWh) Total 220.8 550.9 573.4 10.7 1.3 Lrg urban* 188.2 431.9 445.6 9.7 1.0 Remainder** 32.6 119.0 127.8 15.5 2.4 2. CUSTOMERS (thousands) Total 102.6 278.7 338.0 11.7 6.6 Lrg urban* 70.9 163.6 190.1 9.7 5.1 Remainder** 31.7 115.1 147.9 15.4 8.7 3. CONSUMPTION PER CUSTOMER (kWh) Total 2152 1977 1696 - 0.9 - 5.0 Lrg urban* 2654 2640 2344 - 0.1 - 3.9 Remainder**1028 1034 864 0.1 - 5.8 * DRCSE: Yaound6; DRLO: Douala, Bafoussam; DRNEA: Ngaound&r6, Garoua, Maroua ** Comprises smaller urban centers and rural areas 15 g' w. rates. The results also shed some light on the development of urban and rural markets. and in customer behavior: (1) Sales in rural areas have known a period of sustained high growth, no doubt helped hy SONEL's large network extensions in the interior; since their share in total LV sales i. still rather low, the effect on overall growth is muted; (2) Sales growth after 1987/88 shows a dramatic drop in both urban and rural areas. altht.ugh less pronounced in the latter; (3) Customer growth until 1987/88 kept pace with overall sales; the growth rates drop in recent years, but not nearly as much as sales, and especially the smaller urban and rural regions are holding up quite well; (4) Consumption per customer is markedly different in urban and rural areas. The urban figures are strongly influenced by air conditioning needs in Douala and the Sahelian North, and higher incomes in Yaoundd. (5) In many ele,tric utilities a strong growth in the number of customers, especially in rural areas, is often accompanied by declining average consumption per customer because the newer customers in lower income brackets pull down the system average. The steady trend up to 1987/88, coupled with strong growth of the number of rural customers, is indicative of the favorable economic conditions in those years. The subsequent steep drop in both urban and rural markets testifies to the severity of the ongoing recession. 3.09 More detailed breakdowns of the statistics, by major regions of the country, are presented in Annexes 3.2 through 3.4. The general trend is as described above, but with some significant regional differences. DRCSE and DRLO, which include Yaound6 and Douala, dominate the overall picture. In terms of total LV sales, DRCSE was growing somewhat faster than DRLO in the good years, and it seems to be harder hit by the crisis of the last few years. The three northern provinces (DRNEA) continue to show some strength especially in the secondary urban centers and rural areas. The small, densely populated provinces of the Southwest and Northwest (DRSO and DRNO) have the largest growth in the number of customers, coupled with decreasing unit consumption in the last few years; the total sales are still so small that the effect on the aggregates is not significant. Load Projection to 2004/05 3.10 Within the scope of this report, load projections serve mainly as scenarios to lend perspective to discussions of future sector development. An operational forecast would require much more extensive studies. Load forecasting faces unusual difficulties because of the past dynamic and unpredictable behavior of the power markets. One reason is the vast expansion of SONEL in new service areas, where rapid takeoft of sales in the beginning is usually followed by a period of consolidation. A second reason may have been macro-economic. Between 1972 and 1984, real GDP increased at an average rate of 7.6 % per year, and electrical energy consumption at 12-13 % per year. In 1985 and 1986, economic problems multiplied and Government revenue from petroleum was rapidly falling but accumulated financial reserves still provided the country some leeway in adjusting to a changing international environment. The public sector segment of the power market remained quite dynamic and leveled out only in 1987. 16 The market appears to have reacted with a time lag to the deteriorating economy. Since then. a, shown on the annual figures of Annex 3.1, stagnation has prevailed. 3.11 The format of the load projection takes into account that public service ir ihe coming years will almost entirely be provided by the Southern System. an enlarged No- :ern System including the Province of Adamaoua, and an Eastern System under construction tl it will service Bertoua and surrounding towns within a radius of about 120 km. The remaining oads in isolated centers are negligible. Therefore, the sales data of Table 3.1 have been regroup J by the two existing and one future interconnected service area, as shown in Annexes 4. an(' 4.2. 3.12 The evolution of the power markets in the coming years is difficult to predict because their recovery depends on the lifting of macroeconomic constraints. Without the oil revenues of the 1980's, Cameroon will have to recover by strengthening and expanding its markets for traditional exports and restoring the competitiveness of its industr' The following projections bracket the electric power needs between (i) a base case of slow re very to 1994/95 and accelerated modest growth in the next ten years; and (ii) a high scenario w .n average growth rates below those of the 1978-1988 period, but well above any conceivable short term prospects. The financial analysis (Chapter V) will be developed for the conservativ base case; the high scenario serves only to test the robustness of investment plans in c: se of an unexpected acceleration of emand growth. 3.13 The sales statistics presented in Annex 3 should be interpreted with caution, because the rising percentage of commercial losses indicates unpaid c.)nsumption that is part of the real demand. This is evident from the difference between the gro.-wth rates of generation and sales in the public sector shown in Annex 3.1. On the assumpti i that technical losses have remained more or less the same, the growth of generation is a good proxy for the evolution of real demand. This rate is 1.4 percent higher than the growth of iecorded sales in the ten years ending in 1988; during the following three years the difference widens to 2 percent. To take account of these factors, the basis year 1990/91 of the projections was adjusted by adding ten percent of public sector generation to the recorded sales to LV and MV customers. After addition of actual F sales, the implied technical losses in the basis year are 14.4 percent. They are assumed, conservatively, to remain at that level throughout the forecast period. 3.14 Table 3-4 shows the assumed growth rates for LV and MV usage in the public sector under both scenarios, the allowances for increased HV sales, and the resulting generation requirements. Details can be found in Annexes 4.1 and 4.2. 3.15 The ALUCAM/SOCATRAL loads are expected to remain at their present level throughout the forecast period. For planning purposes 1300 GWh and 145 MW will be added to the public sector requirements. An expansion of th smelter cannot be excluded but, since a special contract for added power supply would have to be negotiated well in advance, the investment planning of the Southern System need not take account of this factor as an uncertainty. Similarly, in case of new electricity demand for a major mining development, the supply may well take the form of an enclave power project with special financing arrangements outside the public sector. 11,7 TABLE 3-4 SUMMARY OF LOAD PROJECTIONS FOR THE PUBLIC SECTOR (A) Growth Rates for LV and MV sales Base Case 1990/91-1994/95 1994/95-2004/05 LV MV LV MV Southern System 3.5 2.5 4.5 4.0 Northern System 3.5 2.5 5.0 4.0 Eastern System 4.0 2.5 6.0 7.0 High Scenario -LV and MV- 1990/91 to 2004/05 Southern System 6.0 Northern System 7.0 Eastern System 8.0 (B) High Voltage Sales by 2004105 CIMENCAM increasing to 60 GWh CICAM increasing to 40 GWh (C) Generation Requirements S Y ST E S Southern Northern Eastern Energy Peak Energy Peak Energy Peak GWh MW GWh MW GWh MW 1. Base Case 1990/91 1189 224 146 25 12 3 1994/95 1344 254 164 28 14 4 1999/00 1668 315 204 35 19 5 2004/05 2065 390 258 44 26 7 2. High Scenario 1990/91 1189 224 146 25 12 3 1994/95 1498 283 186 32 17 4 1999/00 2010 379 255 43 24 6 2004/05 2690 508 355 60 36 9 18 IV. POWER SUPPLY 1. OBJECTIVES AND STRATEGY 4.01 In fulfilling its mandate to provide an expanding electricity supply to Cameroon, SONEL's activities have been guided by thrcee objectives: (i) developing the country's hydroelectric power resources and, where economically possible, substituting hydropower for any existing thermal generation; (ii) extending service to principal towns of the administrative subdivisions of the country; this task, a high priority after independence, is now largely accomplished; and (iii) accelerating rural electrification, as part of the Government policy of improving rural standards of living and of retarding the drift of rural population to the big cities. The realization of these objectives was pursued by construction of a few large hydroelectric power plants, linked by two high voltage transmission networks to the major load centers, and extending these systems by extensive medium voltage grids in the interior to electrify rural areas and in the process shutting down dispersed small diesel generators. SONEL is now entering a new phase, with the accent on densification of rural networks to improve the returns on past investments, and a new emphasis on urban electrification as a prerequisite for enhancing the opportunities for employment and for improving the quality of life in the cities. 2. EXISTING SUPPLY FACILITIES General 4.02 In mid-1991, SONEL operated 800MW of generating plant and networks totalling about 13,150 km of transmission and distribution lines. The largest system services the southern and western parts of the country comprising the major urban concentrations of Yaound6, Douala, Bafoussam and Bamenda. A secondary system supplies the most important northern centers along the axis Garoua-Maroua (Annex 1). Each system relies on hydroelectric power for bulk supply, with minor thermal support. The total installed capacity is made up as follows (see Annex 5.1 for technical details of the hydro plants): Southern Interconnected System Hydro Edea 263 Song Loulou 388 651 Diesel Douala 18 Yaound6 13 Bafoussam .LQ 4!1 692 Northern Interconnected System Hydro Lagdo 72 Diesel Djamboutou 20 92 Dispersed diesel plants -J6 TOTAL 800 19 In mid-1991, the transmission and distribution networks comprised (in km): High voltage 225 kV 480 110 kV (Northern System) 100 90 kV (Northern & Southern Systems) 1232 1812 Medium voltage 55, 30, 15, 10 kV 6411 Low voltage 220/380 V 4928 TOTAL 13151 The Southern System 4.03 The Southern System was originally an L-shaped configuration of 90 kV lines extending from the Mangombe substation near the Edea power plant eastward to Yaound6 (BRGM substation) and westward to Douala (Logbaba substation) and onwards to Bafoussam and Bamenda. The HV system has been further strengthened by single circuit 225 kV lines Mangombe-Logbaba and Mangombe-BRGM. The output of the Song-Loulou power station is transmitted to Mangombe by two 225 kV lines. Annexes 6.1 and 6.2 show the System map and a single-line diagram. 4.04 Most energy for the Southern System is produced in two run-of-river hydro plants at Edea (263 MW) and Song-Loulou (388 MW), both located in the lower reach of the Sanaga River. The Sanaga is the largest water course in Cameroon, with a drainage basin at Edea of 131,400 km and a mean flow of 2100 ml/s. The monthly natural flow (without regulation by reservoirs) fluctuates seasonally from as little as 113 ml/s during the dry season (February-April) to 6900 m'/s at the peak of the rainy season (September-October). Three regulating reservoirs on upstream tributaries are operated to increase the dry season flow at the power plants: M'Bakaou, Bamendjin and Mape, with a combined storage capacity of 7.62 billion m (for details see Annex 5.2). Since these remote reservoirs control only 20 percent of the drainage area, fine-tuning of storage operations is difficult. Water discharged at Bamendjin and Mape takes five days to reach the power stations; for M'Bakaou the travel time is eight days. The forebay of Song-Loulou, operated within a range of two meters, provides no more than daily re-regulation of the flow of the lower Sanaga River. The existing storage is designed to provide a regulated flow of 850 ml/s with a five percent probability of failure. 4.05 The Edea site (head 26 m) has been developed to the limits of the available space by staged construction of three powerhouses of which Edea 1 (23 MW), completed in 1951, was Cameroon's firsthydro development. The establishment of the ALUCAM smelter nearby resulted in the extension of Edea I to 34 MW and the construction of the 125 MW Edea II plant in 1958. To meet the growing needs of the public system, Edea III (104 MW) was commissioned in 1974. In parallel with this third stage, two storage reservoirs were completed: M'Bakaou in 1973 and Bamendjin in 1975. Edea, having no pondage at all, is fully dependent on upstream regulation for its output. The 14 units have a combined discharge capacity of 1309 m'/s. Based on average regulated dry season flow, the continuous output is 171 MW. 4.06 Continued rapid load growth in the public system and the doubling of ALUCAM's smelter capacity in 1981 resulted in the selection of Song-Loulou as the next major 20 hydro development. The plant is also located on the Sanaga River. 55 km upstream of Edea, and the drainage area and natural flow are virtually the same as at Edea. The dam at Song-Loulou. developing 42 meters of head, and the first stage of the powerhouse were commissioned in 1981. With the completion of the second stage in 1988, the power plant comprises eight 48.4 MW units with a combined discharge capacity of 1040 m"/s. Owing to the daily pondage volume at Song- Loulou, some extra water can be released there in anticipation of the evening peak to increase Edea's output by 35 MW. Simultaneously with the construction of Song-Loulou's second stage, the third upstream storage reservoir, at Mape (Annex 8.1,site M2b), was completed in 1988. 4.07 The actual load carrying capability of the Southern System is shown below, in conjunction with the forecasts of Table 3-4: Primary Energy Dependable Capacity GWh MW 1991 System 4095 634 Capacity Reserve (10 %) - 64 4095 570 ALUCAM/SOCATRAL 1300 145 Available for public sector 2795 425 Forecast Range: 1999/00 1668 - 2010 315 - 379 2004/05 2065 - 2690 390 - 508 The guaranteed supply to the public sector is unbalanced: the energy rating corresponds to a peak of 527 MW at system load factor, whereas only 425 MW is available. Therefore, installed capacity is critical in the priorities for expansion. 4.08 Comparison of the supply capability as derived above with the projections of Table 3-4 shows that the present system can meet the loads of the base case to the end of the forecast period (2004/05) without problems. If the high scenario were to materialize, a capacity shortage would develop as of 2001/02 but again, energy would suffice until 2004/05. This result suggests that, generation planning being no problem, SONEL should over the medium term concentrate its investments for the Southern service area on subtransmission and distribution. The Northern System 4.09 Until 1982, most of northern Cameroon was supplied by a thermal power station at Garoua and a number of dispersed smaller plants. The thermal generation was reduced to a minimum as a result of the commissioning of the 72 MW Lagdo hydro power plant and reservoir on the Benou6 River, some 40 km Southeast of Garoua (see Annex 7.1 for a System map). At the damsite, where the Benou6 River drains about 31,000 km2, the average natural flow is 221 ml/s. The variations are large, with monthly averages ranging from zero to 2160 m`/s, and annual averages falling between 66 and 400 m3/s. The River is regulated by 4.6 billion m' of live storage over a multiannual operating cycle, providing a regulated dry-season flow of 111 ml/s producing 190 GWh per year with a dependable capacity (under reduced head) of 42 MW. The long term average output is 350 GWh. The hydro generation is backed up by 20 MW of diesel capacity of the Djamboutou plant near Garoua. 21 4.10 Lagdo's generation is transmitted to Garoua by a double-circuit 110 kV transmission line. The older part of the HV Northern System comprises a 90 kV line Garoua - Guider - Maroua, from which 30 kV lines extend to the smaller load centers (see Annex 7.2 for a single-line diagram). A new 110 kV line Lagdo - Ngaound6r6 is under construction, in parallel, another project is underway to reinforce the distribution system of Ngaoundr6 and to establish a regional 30 kV network to supply the neighboring towns. These two projects, costing FCFA 15.6 billion (US$ 57 million) are being implemented as turnkey projects with bilateral financing from Spain. Upon their completion in 1994, a large part of the Province of Adamaoua will be integrated into the Northern System. 4.11 The present load carrying capability of the combined hydro-thermal system (including the existing diesel capacity at Ngaound6r6) is estimated below, and shown together with the projections of Table 3-4: Primary Energy Peaking Capacity GWh MW Hydro (four units) 190 42 Diesel JQ2Q4 290 66 Reserve (largest unit) I11 System rating 290 55 Forecast Range: 1999/00 204 - 255 35 - 43 2004/05 258-355 44-60 The estimated system capabilities are sufficient to carry the load until 2004/05 in the base case (Table 3-4). Under the high scenario, both energy and peaking capacity would be required as of 2001/02. However, it should be recognized that the rating of the Northern System includes the contribution of obsolete thermal plant; the coordinated hydro-thermal operation will result in rapidly rising fuel costs towards the year 2000, and some units may be retired at some time during the forecast period. Therefore, the need for new generation plant may arise earlier than indicated by the load - resource balance. The Province de I'Est 4.12 The Province de l'Est merits special discussion because it is the only part of the country that will not be absorbed in the interconnected system in the foreseeable future. In 1990/91, sales stood at 9.3 GWh, an increase of 9 percent over the preceding year. Most of the energy is supplied by three diesel power stations at the provincial capital Bertoua, at Abong M'Bang and at Batouri, with a total installation of about 4000 kW. SONEL's plans to improve service include the construction of a regional 30 kV transmission system and of a hydro plant, Collomines, on the Kadei River near Bertoua. Collomines would have 12 MW of installed capacity and generate on average 97 GWh per year, thus permitting the shutting down of the diesels. Once the plant is commissioned, the hydro generation would be sufficient to cover the high load growth to at least 2004/05 (36 GWh and 9 MW, see Table 3-4). 4.13 The realization of these plans has run into financial difficulties. Network reinforcement and extension of the local distribution systems commenced with CCCE financing and was then suspended, with a construction volume of about FCFA 2.6 billion outstanding. The 22 signing of contracts for Collomines was delayed when bids for the civil works turned out to be much higher than estimated. The current cost estimate for the plant is FCFA 13.9 billion (US$ 50 million); KfW will finance this amount, subject to successful conclusion of contract negotiations. However, the higher than expected costs have created a financing gap of FCFA 4.5 billion (US$ 16 million) needed to build the 100 km transmission line Collomines-Bertoua. SONEL is seeking offshore financing for this component, but self-financing is not excluded. Meanwhile, the partly completed transmission lines and new distribution centers have left potential customers waiting for service. SONEL is planning to install three mobile diesel units ( cost US$ 5 million, assumed to be financed by the CCCE) in Bertoua to provide electricity until the in-service date of Collomines. 4.14 In retrospect, it seems clear that vast resources have been programmed to electrify a region that has low demand growing more slowly than originally predicted. Alternatively, the area could be supplied from the Southern Interconnected System by building a 225 kV line Yaound6 - Bertoua costing FCFA 14.8 billion (US$ 55 million, including the line terminals). Since in both cases hydro power displaces diesel generation,and the Southern System has a large surplus capacity, it would seem that the scheme with the lowest investment cost is to be preferred. Even so, as long as annual fuel expenses remain in the 1.5 to 2.0 million dollar range, it would make sense to defer large investments, finish the subtransmission and distribution system and first develop the local power markets. 3. RESOURCES FOR FUTURE SUPPLY 4.15 Although Cameroon's wealth of hydro power potential has been known for a long time, a systematic and comprehensive survey was undertaken only in 1979, when SONEL commissioned EdF-International (i) to update an earlier hydro resource inventory and (ii) to recommend the next major project to be considered after absorption of Song-Loulou I (4 units) in the Southern System. The studies were completed in 1983, and the immediate result was the decision to proceed with construction of the second stage of Song-Loulou, the Mape Reservoir, and to prepare the Nachtigal Amont Project (see par. 4.18). 4.16 To keep inventorization of resources to manageable proportions, some cutoff points must be established with respect to the size of the developments and the valuation of the resource in terms of opportunity costs. The adopted limits for size were minimum annual outputs of 100 GWh on larger rivers and 50 GWh on the smaller ones. The valuation of hydro output was based on the cost of equivalent coal-fired thermal power, at the time (mid-1982) assessed as FCFA 10/kWh or about US$ 0.03/kWh. This threshold was well below the cost of oil-fired thermal power in 1982 and, consequently, the inventory data retain their validity if coal as a yardstick is disregarded and oil-fired thermal power is substituted at today's much lower prices of petroleum products. Nevertheless, it should be kept in mind that inventory estimates usually remain highly provisional; they serve to screen priority sites for followup by feasibility studies, and only at that stage, which includes thorough geophysical exploration and drilling, can estimated inventory costs be verified. 4.17 The hydro inventory covered 112 sites (some already at more advanced levels of investigation), having an aggregate potential of 115 TWh of which at least 105 TWh were judged to be economically attractive. Annex 8.1 shows the main locations. Although development prospects exist throughout the country, as much as 90 TWh is found in the densely populated southwestern region, on the Sanaga, Nyong and Ntem rivers. In the South-Central region, at the headwaters of the Sanaga River, a further 4.5 TWh can be developed. The rivers in the 23 Southeast, which are part of the Congo River Basin, have a combined potential of 5.5 TWh. Finally, on the rivers in the North flowing towards Nigeria and Chad another 3.8 TWh was identified (see Annex 8.2 for these clusters of resources). 4.18 Annex 8.2 presents also a selection of priority sites by the consultants that gives some idea of plant sizes and costs. The total potential on the list is 24 TWh, or 23 percent of all of Cameroon's resources that appear to be economically attractive. After adding interest during construction, the unit costs at 1982 prices fall in the range of US$ 0.020 to 0.025/kWh, which probably should be doubled to relate the table to 1992 prices. However, the sites listed refer to either run-of-river plants or plants having little storage. Therefore, a large portion of the rainy season generation would not be usable unless the power plant development is combined with the building of additional reservoirs upstream. The most interesting storage prospects at the headwaters of the Sanaga River Basin are listed in Annex 8.2. 4.19 Given Cameroon's abundant hydro resources, little attention has been given to the role that thermal power could play in future electricity supply. Since the Southern System is only partially regulated with a large energy surplus in each rainy season (see par. 4.23), thermal power could serve as a source of complementary energy in dry years (the same function as hydro storage); in other, normal, years the installation would provide peaking support. The most obvious solution would be gas turbines using domestic natural gas, provided that the intermittent demands for fuel can be accommodated within a larger gas market. 4. PLANNING ISSUES Generation 4.20 In the mid-1980's, before the present economic stagnation became evident, SONEL's power planning was - naturally - strongly conditioned by the high growth rates of over 12 percent per year experienced since independence. Even after allowing for some slowdown, a sustained rate of eight percent per year still appeared a distinct possibility. The high load projections at the time indicated, nevertheless, that it awould be premature to plan for interconnection of the Northern and Southern systems. Accordingly, preparations for meeting future demand centered on two new sites, one for each major system: (i) Nachtigal Amont. The site is located 160 km upstream of Song-Loulou on the Sanaga River and some 70 km North-northeast of Yaoundd (see Annex 8.1, site SI). The run-of-river project is based on the development of a head of 42 meters and an ultimate installation of four units totalling 266 MW. The project would add about 1060 GWh of average annual output to the system, at a capitalized cost of FCFA 115 billion (US$ 420 million) J/. (ii) Warak. This site, identified in the inventory as Bini A Wara, is located in the Province of Adamaoua on the Vina Nord River, 30 km Northwest of Ngaounddrd (Annex 8.1, site VNI). The dam develops 214 meters of head and stores 33 percent of the average annual inflow. With a powerhouse installation of three units totalling 75 MW, 5/ Estimate based on feasibility study of March 1988, which states a construction cost of FCFA 77 billion at 1988 prices. 24 the primary energy output is 240 GWh. The plant would be connected to Ngaound6r6 by a 225 kV line initially operated at 110 kV. The estimated capitalized cost of FCFA 75 billion ( US$ 275 million, including US$ 5.7 million for transmission, at 1991 prices) suggests that the project is not nearly as attractive as thought at the time of compilation of the inventory. 4.21 Given the current outlook for a much lower electricity demand than expected ten years ago, the urgency of proceeding with Nachtigal Amont and Warak has disappeared and neither project is in the current investment program. Meanwhile, SONEL has embarked on the investigation of three new hydro prospects in the southern half of Cameroon: (i) Memvd El is a site on the Ntem River, which flows westward just North of the border with Equatorial Guinea (Annex 8.1, site NT2b). The inventory located a promising stretch of the river where over 3500 GWh could be developed. The damsite, located about 100 km from the mouth on the Atlantic Ocean, would be the key to providing reservoir storage for downstream plants. The project in question has a potential of 750 GWh with an installed capacity of 150 MW. The pre-feasibility investigations are financed by SONEL and the Japan International Cooperation Agency (JICA); (ii) NJck is a power site on the Njong River which flows parallel to the Sanaga to the Atlantic Ocean. The project is located about 160 km from the mouth, roughly halfway between Douala and Yaound6 (Annex 8.1, site NY5). The potential is of the same order as the Memvd Eld site: 850 GWh produced by an installation of about 150 MW. The ongoing work is a continuation of a preliminary study dating from 1974. The subsequent inventory estimate, escalated to 1992, indicates a cost of the order of US$ 350 million. The project is being studied in conjunction with the Deldo storage project upstream, at the headwaters of the Njong River southeast of Yaoundd (Annex 8.1, site NY1). (iii) Loin Pangar is the second largest storage site in the Sanaga Basin. It is located in eastern Cameroon, just below the point where the Lom and Pangar tributaries join to form the main stem of the Sanaga, 100 km North of Bertoua (Annex 8.1, site L3). The site would provide 6.6 billion m' of usable storage, and increase the regulated flow of the Sanaga at Song-Loulou from 850 to 1210 mls, with a corresponding increase of the potential power output at Song-Loulou and Edea by 1700 GWh. The inventory estimates of 1982 suggest that , today, the project would cost between US$ 250 and 300 million (capitalized costs). 4.22 The orientation of SONEL's ongoing resource investigations, some supported by external aid, raises two questions: (i) If Nachtigal Amont and Warak, which have been carried to the stage of detailed engineering, are no longer urgent, there seems little point in pursuing in depth other projects of the same order of magnitude that have no chance of early implementation either; and (ii) the projects being investigated would not help resolving some basic problems of the Southern System. 4.23 The nature of the Southern System can be more readily understood with reference to Figure 4-1. It shows the natural flow of the Sanaga River at Edea in the second lowest water year on record (1945-46), in relation to the regulated flow and the turbine discharge capacities at Song-Loulou and Edea. One can see at a glance that between July and December there is plenty of water to run the hydro plants at full capacity. The storage capacity of the three upstream reservoirs boosts the streamflows during the rest of the year to 850 m/s, but it should be r- FIGURE 4-1 CHARACTERISTICS OF THE SOUTHERN HYDRO cYSTEM (Natural Flow of the Sanaga River at Edta) 5080 ni 3/5 3006 2non 7'gROME D/SC/MME c.nAcry~ €Z>&A 85o 'è a 26 recognized that the full s )rage capacity is only used in the driest years. Despite the assured storage support, the rem te location of the reservoirs (noted in Par. 4.04) poses occasionally problems. Releases canr at be timed with enough precision to anticipate fully the the unregulated runoff below the storay dams. Therefore, miscalculations may result in spill at the power plants (in case of excessive -leases) or a water shortage at peak time that must be compensated by thermal generation. n event of the latter type occurred in March 1990. when all available thermal capacity in ie Southern System was put in service to generate two million kWh in two days. As the load - ows, the System will become increasingly vulnerable to this problem. 4.24 '1 urning now to future needs, it should be noted that the only measure addressing the System prol- em noted above is the instrumentation and mathematical modeling of the Sanaga Basin. The ob ative is to obtain on-line streamflow estimates at Edea from hydrometeorological measurement' transmitted by satellite to the load despatch center, and to plan storage releases and plant operat: ns accordingly. Calibration and testing of the model are in progress. 4.25 With regard to additional supplies, the projects already examined or under study are absorbing considerable human and financial resources without any clear picture of priorities. From th. streamflow profile on Figure 4-1 it is evident, that another run-of-river project such as Nachti,c-l Amont provides more rainy season energy that is already abundant, while contributing relativ:iy little to the primary supply in the dry season. Addition of storage is a better way to increi-se the efficiency of existing investments, but Loin Pangar has the disadvantages of another rem e location and of a cost out of line with foreseeable needs. The Njong Project has the same pro dem as Nachtigal in a different river basin, unless it is supported by upstream storage which wil further raise the investment costs. Finally, Memvd El would appear capable of providing w Jll-regulated generation, but there is no complementarity that would enhance the output of the ! .maga plants. 4.26 Apart from the operations model referred to in Par. 4.24, there are a number of important options to increase the system productivity and to add to its capacity in increments commensurate with the growth of the power markets. Among the hydro options, the following are noted: (i) Pondage above Song-Loulou. The 1982 Inventoryf/ points out that the energy losses and risks of water shortages could be much reduced by building a small compensation reservoir of 50 to 150 million m upstream of Song-Loulou, to re-regulate the storage releases. There is no evidence that this idea has been followed up by a systematic investigation of the Sanaga River valley in the area. (ii) A fourth Storage Reservoir at MpVem. The dam site is located on the Ndjdkd River, a tributary of the Sanaga discharging in the main stem North of Yaound6 (Annex 8.1, site NJ I). The project was considered as an alternative to Map6, and rejected at the time, mainly because of the smaller drainage area 2/. The storage capacity of 2.1 billion m, equivalent to 1.5 times the average annual inflow, would increase the regulated flow of 6/Inventaire des Ressources Hydrodlectriques, Tome 1, Annexe 2, pp 20-22 2/ibid. Tome 3, Bassin Amont de la Sanaga, p. 32.6 27 the Sanaga by 130 m"/s, and the primary energy output at Song-Loulou and Edea by about 600 GWh (70 MW continuous). Inventory estimates, escalated to 1992, suggest an investment cost of the order of US$ 120 - 150 million. Compared to the costs of the projects under investigation, this seems a much more manageable investment relative to the SONEL's financial resources and foreseeable needs. Since the storage is a complement that would be fully used only in extremely dry years, the risk of not having filled the reservoir in the preceding year seems remote, provided that correct operating rules are established and respected. Another advantage is the relative proximity to Song- Loulou, making it possible to help compensate for the inevitable errors in the timing of releases from the remote existing reservoirs. (iii) A low capacity factor Peaking Plant. With improved regulation, the existing plants on the Sanaga will operate at increasing capacity factors, and eventually more peaking capacity will be necessary to balance the system. Since the Edea site is saturated physically and at Song-Loulou a second powerhouse would have to be built, this capacity is going to be costly. As an alternative, the inventory data could be scrutinized for prospects of developing a high head in a relatively small watershed to provide: (a) reservoir storage for use in the dry season to fill the valley in the Sanaga production profile; and (b) peaking capacity all year around. A site in the high mountains North of Douala would also reduce future investments in transmission to service the growing loads in that densely populated part of the country. 4.27 The seeming abundance of hydro resources has produced a certain reluctance by the Government to contemplate thermal power, which tends to be associated automatically with high fossil fuel consumption. SONEL has studied for quite some time a project for a gas turbine plant at Yaoundd, to improve the security of supply. At present, the capital receives power over a 90 kV and a 225 kV line from Edea. In case of an outage of the 225 kV line, the 90 kV line plus the 10 MW diesel plant near Yaoundd must carry the peak, now about 70 MW. The gas turbines have been viewed as an alternative to a second 225 kV circuit. It is evident from the production profile of the Sanaga plants (Fig. 4-1) and the streanflow records, that a complementary thermal plant could be a highly attractive means of firming up secondary energy with a modest level of average fuel consumption. It is estimated that a 75 MW gas turbine plant could increase the firm system output by at least 450 GWh, of which 100 GWh would be average thermal generation and the rest firmed-up hydro output. If natural gas is developed for the Douala market, this prospect merits further investigation, bearing in mind that an irregular demand for gas is only viable commercially when it can be superimposed on an established base load for gas. Besides increasing the firm hydro output, some thermal capacity in the system would also afford some protection against exceptional droughts that may not be evident from the records but cannot be ruled out. 4.28 Turning now to the Northern System, the main potential problem is the vulnerability of the hydro generation of Lagdo to prolonged droughts. The original feasibility study was basing the appraisal on a 33-year streamflow record (1944 to 1975) showing an average flow of 248 m'/s. In the following years up to the in-service date of the dam (1982), the registered average was 175 ml/s and, after commissioning of the power plant, the estimated average natural flow between 1982 and 1987 fell to only 104 ml/s. This dry period caused immediate problems with the filling of the reservoir and the need for heavy thermal support in 1982-83, 1984-85 and 1987-88. Only in 1988-89 did the reservoir fill to capacity for the first time. Lagdo can store the energy equivalent of 250 GWh, almost twice the current annual load 28 evaporation losses) can fall to as little as 76 GWh, resulting in rapid storage depletion. Despite the high costs of fuel in the interior, thermal support is probably the most economical means of guaranteeing the primary supply, until the annual load growth becomes large enough to warrant the construction of a new hydro plant. An interconnection with Chad merits further investigation as a possible least-cost solution; such a link could serve to import thermal energy and to export peaking capacity as long as Cameroon has a surplus. Transmission and Distribution 4.29 In line with the electrification objectives (Par. 4.01), SONEL has concentrated its initial efforts, between 1973 and 1987) on extension of service to Cameroon's main administrative centers and the surrounding towns and villages. Although this type of investment is often labeled "rural electrification", it is in reality a mix of network extension to secondary urban centers in the interior and any rural electrification that can be accommodated conveniently within an overall scheme. SONEL has attempted to keep costs within acceptable limits by extending MV lines along the existing main roads, and by selectively introducing single-phase distribution technology. Moreover, aware of the financial risks of undertaking extensions having a low customer density, SONEL has chosen projects that could count, in part, on concessionary foreign financing. 4.30 At the end of 1991, SONEL was in the last phase of construction of two major electrification projects: (i) Rdseau Centre-Sud Phase II, comprising MV and LV extensions within a 100 km radius around Yaoundd, and in the coastal zone along the axis Edea - Kribi. (ii) R6seau Nord-Ouest, which extends the electrified zones in the regions North and West of Bamenda, towards the border with Nigeria. A third project, the R6&eag de l'Est, around Bertoua, was partially completed. Preparations are underway to resume the work when the uncertainties concerning the Collomines hydro project are resolved (Par. 4.12 - 4.15). 4.31 Meanwhile, SONEL has prepared several new distribution projects. The two most impurtant ones would strengthen the MV and LV networks of Yaound6 and Douala, which were left behind in the expansion of the 1970's and 1980's. The pent-up demand for electricity resulted in thousands of illegal and technically flawed LV connections that explain in part the steep increase of technical and commercial losses in the two largest cities in the country. It should be noted that physical rehabilitation and extension should be accompanied by establishment of a reliable system of urban property registry and a reorganization of SONEL's customer management. Failure to act in these areas would perpetuate the existing widespread fraud and greatly reduce the attractive rates of return on these projects. 4.32 The Yaoundd Urban Distribution Proiect, requiring an investment of FCFA 9.0 billion ( US$ 33 million), was started at the end of 1991 with two-thirds of the investment being financed by the CCCE. The works comprise 130 km of MV lines, 254 km of LV extensions and 145 distribution substations. The economic rate of return estimated by SONEL falls in the 7 to 20 percent range, with an expected value of 13.7%. Rates of return on sub-components vary from zero to 35%. The scheme would permit initially the connection of 6000 customers, increasing to 21,000 by the year 2001. Completion is expected in 1994. 29 zero to 35%. The scheme would permit initially the connection of 6000 customers, increasing to 21.000 by the year 2001. Completion is expected in 1994. 4.33 The Douala Urban Distribution Project would cost FCFA 10.8 billion (US$ 40 million). Subject to successful financing, construction is scheduled to start within the next two years. The planned reinforcement and extension consists of 113 km of 15 kV lines. 326 km of LV lines and 197 distribution substations. According to SONEL's study, the economic rate of return lies between 10 and 28 percent, with a most probable value of 19%. Initially, about 8000 new customers would be connected; this number would rise to 27,000 by the year 2001. Globally, the project appears to be even more attractive than that for Yaoundd. Moreover, the rates of return on components vary from 15 to 24 percent, which suggests that implementation in stages would be possible without large up-front investments. 4.34 A third project, the "Densification des R6seaux du Littoral. de l'Ouest et du Sud- Ouest", is intended to improve the returns on past investments in the Province of Douala (excluding the urban area) and the two adjacent provinces. The plan includes reinforcement of the 90 kV grid (38 km), 840 km of 30 kV lines, 464 km of LV extensions 240 distribution substations. In the short term, it would permit connection of 20,000 new customers, and eventually (by 2015) about 72,000. However, with annual consumption per customer of only 650- 850 kWh and heavy investment in MV facilities, the economic return is a modest 8 percent on an investment of about FCFA 9 billion (US$ 33 million). Components of the project related to secondary urban centers may show better returns, but no analyses along these lines are available yet. 4.35 In view of the past heavy investments in generation and associated transmission, and the much reduced load growth, no new major transmission projects are foreseen. The only important items in the expansion program are the reinforcement of the Logbaba and Bekoko substations in the Douala region, at a cost of about FCFA 2.1 billion (US$ 8 million), for which financing is being sought. Eventually, the HV grid may be further strengthened by construction of a 225 kV line between Song Loulou and Bafoussam. Summary of Investment Program 4.36 The cash flows of the construction costs for the projects in SONEL's investment program are compiled in Table 4-1. They include projects with firm financing and a few others ( Nos. 1, 9 and 10) of which one can be reasonably sure that they will be started within the four years covered by the table. The State-financed works in the Province of Adamaoua are added to the SONEL subtotal to obtain the overall investment in the sector. However, only the SONEL investments are entered in the financial analysis of Chapter V; they are for about 40 % self- financed by SONEL. When State-financed works (carrying 100 % debt) are added, the ratio for the sector falls to about 30 percent. TABLE 4-1 SHORT - TERM INVESTMENT PROGRAM OF THE POWER SECTOR (amounts in billions of current FCFA) FISCAL YEAR 1991 - 1992 1992 - 1993 1993 - 1994 1994 - 1995 Components* A F T A F T A F T A F T 1. Collomines - - - - - - 1.50 5.99 7.49 1.33 5.31 6.64 2. Centrales Therm. 0.24 0.35 0.59 0.39 0.57 0.96 0.88 1.32 2.20 0.83 1.37 2.20 3. Centrale Bertoua - - - 0.60 0.00 0.60 1.20 0.00 1.20 - - - 4. R6seau de Vest - - - 0.39 0.67 1.06 0.63 0.95 1.58 - - - 5. R6seau CS II 0.90 0.00 0.90 - - - - - - - - - 6. R6seau CS III - - - 0.60 0.00 0.60 0.60 0.00 0.60 0.60 0.00 0.60 7. R4seau Nord-Ouest 0.25 0.00 0.25 - - - - - - - - - 8. Yaound6 Distrib. 0.55 1.10 1.65 0.70 1.41 2.11 1.75 3.49 5.24 0.00 0.00 0.00 w 9. Douala Distrib. - - - - - - 1.39 2.09 3.48 1.80 2.70 4.50 0 10.Substa. Log. B6k. - - - 0.39 0.59 0.98 0.46 0.69 1.15 - - - 11.Misc. Inv. 2.33 0.00 2.33 2.50 0.00 2.50 2.50 0.00 2.50 2.50 0.00 2.50 12.Am6lioration Gestion 0.00 1.60 1.60 0.00 1.60 1.60 0.00 1.60 1.60 - - - SUBTOTAL SONEL 4.27 3.05 7.32 5.57 4.84 10.41 10.91 16.13 27.04 7.06 9.38 16.44 State-financed 13.Lagdo-Ngaound6rd** 0.00 1.50 1.50 0.00 6.60 6.60 1.00 7.50 7.50 0.00 10.10 10.10 SECTOR TOTAL 4.27 4.55 8.82 5.57 11.44 17.01 10.91 23.63 34.54 7.06 19.48 26.54 * A= Autofinancement; F= Offshore financingl T= Total ** Includes both transmission line and distribution system of Ngaound6r6 31 V. SONEL'S FINANCES Accounting and Audit 5.01 SONEL publishes regularly and timely its annual reports to the Board of Directors on the management and finances of the company. The Accounting and Finance Department is organized by divisions charged with treasury, general accounting, management accounting and budget, accounts receivable, and inspection of the accounts (see also Par. 2.11). The annual report of the "Commissaires aux Comptes" to the Board of Directors, required by law, reads more like a commentary on the accounts submitted than an independent opinion on their quality. In fiscal 1983-84 (year ending June 30) SONEL retained for the first time an external auditor to examine the accounts. Since then, the same auditing firm has reviewed the books annually; however, this activity is of the nature of expert assistance to SONEL's finance department and should not be mistaken for an independent external audit. Such an audit was commissioned for the first time in 1990 to review the accounts for fiscal 1989-90, in connection with the execution of the performance contract of SONEL with the Government. 5.02 The intervention of an outside firm in 1984 resulted in a number of important improvements to the accounting methods. Legally, SONEL operates under the concession system, which can entail many complications. The most significant change was the treatment of charges for depreciation and renewal. As of 1983-84, the assets in both the public and private domain are subject to technical depreciation (as a function of the useful asset life) and a "provision de renouvellement". Historically, the latter was intended as a reserve enabling the concessionaire to return the public domain assets in their original state at the end of the concession. With the State acting as owner and concessionaire, this event has become hypothetical. Therefore, the "provision de renouvellement" has been reinterpreted as an additional reserve to compensate for monetary depreciation. The "amortissement de caducit6", a de facto double depreciation on assets in the public domain financed by the concessionaire, was abandoned. Another significant change in 1984 was the incorporation of customer's contributions in the balance sheet. The method to determine the "provision de renouvellement" was modified in 1987-88, resulting in extraordinary adjustments of the balance sheet. The external auditor who reviewed the books in 1990 disagreed with the change and made this one of several reasons for not certifying the accounts for 1988-89. Other reasons include: discrepancies in inventory records, inadequate reconciliation of treasury operations with bank accounts, and absence of auxiliary accounts of transactions with suppliers. 5.03 Despite SONEL's efforts to improve the accounts, it is evident from the available information that the utility's accounting systems leave much to be desired. An examination of the records for the last seven years gives rise to the following observations: (i) Fiscal 1985-86 was the last year that funds flow statements ("Tableau de passage aux soldes") were part of the publishc I records. Their absence makes it difficult to form a reliable picture of the evolution of the debt service and the sources of funds for investment; (ii) The accounting for Work in Progress is not well documented; transfers to the register of assets in service, as well as their classification, needed from time to time large corrections and even so leave questions outstanding; (iii)Large entries that appear extraordinary are only partially or not at all explained; 32 (iv) The stated net income is obtained by combining the results of regular accounts ("exploitation") and extraordinary accounts ("hors exploitation"). The second category contains much more than special items of a non-recurring nature. It includes many corrections and write-offs applicable to preceding years. and they are so large as to cast serious doubt on the quality of the regular accounts. The records of recent years illustrate item (iv): Net Income 1987-88 1988-89 1989-90 1990-91 "Exploitation" Revenues 41.0 41.5 49.6 55.1 Expenses 2 42.6 41.4 43.8 1.5 -1.1 8.2 11.3 "Hors Exploit." Revenues 8.3 20.2 12.8 9.3 Expenses J.6 20.2 1.66 14.3 Total -2.8 -1.1 4.4 6.3 In conclusion, an exhaustive external audit of SONEL's accounts, observing internationally accepted standards, would appear to be a high priority. Tariffs 5.04 SONEL has two distinct cat ories of tariffs: those applicable in the public sector and determined by procedures customary for electric utilities, and bulk supply tariffs negotiated with large special customers. The rules of the concession system call for regular tariff adjustments based on outdated index formulas going back to colonial times. Actually, for a long time Government has set tariffs within a framework of general price controls in the economy. In 1982 SONEL received a 25 % general increase, but the following adjustment of 10 %, requested in 1984, was delayed until mid-1986. The most recent change in September 1989 was prompted by a financial crisis, although in the process the structure was also rationalized. The rates for the public sector, applicable throughout the country and still in force at the beginning of 1992, have the following features (for details see Annex 9): Low Voltage Customers are charged flat rates per kilowatthour for each category of use: Lighting (FCFA 53-63), residential use ("usages domestiques" - FCFA 47), commercially oriented use ("force motrice" - motive power, cottage industries - FCFA 47) and public lighting (FCFA 32). Often the same customer has several meters, which adds to the complications of billing and customer management to be discussed below. Medium Voltage Use is billed by a two-part tariff: FCFA 7900 per kilowatt per year subscribed power, and a block tariff for energy declining from FCFA 35 to 27 per kilowatthour. High Voltage Customers are also charged a two-part tariff, but the capacity charge (FCFA 13,517 per kilowatt per year declining to zero) varies inversely with hours of utilization. The declining block rate for energy varies from 23.53 to 11.95 FCFA per kilowatthour. The current tariff represents an important advance over the system prevailing until September 1989, which obeyed the rules of the concession system and which had not been 33 adapted to the evolving structure of supply. The result was a proliferation of tariffs (about 120) in five concessions, and large differences in medium-voltage tariffs in Douala and Yaound without any justification. 5.05 Historically, power purchases by ALUCAM, the largest special customer, developed by a series of contracts that became highly complex because of the underlying assumption that blocks of power supplied to ALUCAM originated in different hydro plants, i.e. Edea across the Sanaga River and later also Song Loulou. This obsolete structure, which did not recognize the realities of operation of an interconnected system, was replaced in January 1990 by a simple two-part tariff, comprising a flat fixed charge of FCFA 600 million per month and an energy charge of FCFA 4.31/kWh. The current contract guarantees ALUCAM 145 MW of firm power. 5.06 The aluminium fabricating plant SOCATRAL, adjacent to the smelter and having a consumption of only 12.5 GWh per year, pays a special rate equivalent to about FCFA 14/kWh, which is about the normal industrial high-voltage tariff for high load factor customers. The State-owned textile mill CICAM in Northern Cameroon has run into financial difficulties. Although classified as a high-voltage customer in the sales statistics for the public system, the company obtained a preferential rate from SONEL, effective July 1990: FCFA 7900 per kilowatt- year subscribed plus a flat energy rate of FCFA 24/kWh. In FY 90-91, Government obliged SONEL to write off FCFA 870 million of CICAM's arrears. 5.07 The present tariff has some basis in long run marginal cost analysis performed by external consultants and SONEL staff in 1987. The study was based on a ten-year expansion program to 1995, including Nachtigal Amont, to meet a public sector load that for 1991/92 projected twice the level actually recorded. The consultants examined for the first time economic costs by season and time of day. The recommended tariff structure would introduce the following new elements: - High Voltage. Fixed annual capacity charge, a high energy rate for peak hours in the dry season and a low rate for all other hours; - Medium Voltage. Annual capacity charge based on hours of utilization, and time-of-day and seasonal energy rates. Pending installation of new meters, a simplified equivalent tariff was proposed for existing customers; - Low Voltage. A fixed capacity charge for two categories of customers, depending on subscribed power (more or less than one kVA) and a flat energy rate. The actual tariff structure is still based on SONEL's traditional model, but the effective average consumer costs by voltage category are more or less equivalent to those of the recommended tariff. Since the distinction between seasons has not been introduced, the energy rates are higher and the capacity charges lower for MV and HV customers. The flat rate for LV customers also appears to be equivalent to average economic costs as calculated at the time. Public lighting is subsidized, but the implied revenue loss is no more than one half of one percent of SONEL's revenue. In conclusion, there is no evidence of major distortions in the pricing for the main customer categories, but without more differentiation of rates there is little incentive to conserve peaking energy use or to shift consumption to the wet season. Since the tariff study of 1986/87 requires updating and testing by a billing analysis, it is not advisable to make changes before the situation has been reassessed to take account of reduced load growth, of a scaled-down investment program and of the need first to improve customer management (see below). 34 Customer Manaeement 5.08 Because of the pervasive effects of customer management on SONEL's finances, it merits specific attention in this chapter. In addition to its technical functions, the Department of Distribution manages low- and medium voltage customers, including meter reading, billing and collection. Since 1984, the operations are decentralized by five regions, in each of which SONEL staff report administratively to the regional manager and functionally to the head office via the regional "attach6s"(see Annex 2). Aware of the essential role of informatics and communications in this organizational setup, SONEL commissioned an outside consultant to develop a computerized customer management system. The product, known as the NAC (for "Nouvelle Application Clientle") turned out to be extremely complex and making heavy demands on staff skills. Since premature widespread introduction could spell disaster, the NAC was implemented in secondary centers, while the main revenue producers like Yaoundd and Douala continued to use the automated, but essentially manual, existing system called AAC (for "Ancienne Application Clientle"). 5.09 For the last six years, the two systems have operated side by side without much progress on streamlining at a company-wide level. One can advance at least three reasons for this stagnation: (i) Until rather recently, the defective NAC system was also burdened by the proliferation of tariffs, and the existence of multiple meters per LV customer is still a complication; (ii) The implementation of NAC in the secondary centers entailed demands for highly skilled staff who often prefer to stay in the big cities; and (iii) Success requires close cooperation and communication among the Departments of Distribution, Finance and Informatics, which all seem to prize a high degree of autonomy. 5.10 The negative effect on SONEL's finances is evident from the record. As noted in para. 3.04, the percentage of losses in the public system has been steadily rising, and of the overall loss of 24 percent, at least ten percent can be attributed to commercial losses, now of the order of five billion FCFA per year (US$ 18 million). The losses are compounded by collection difficulties that are not exclusively related to Cameroon's economic circumstances: In the last two years, writeoffs of receivables amounted to another five billion FCFA. Moreover, 3.4 billion FCFA (US$ 12.4 million), representing discrepancies between the records of accounts receivable and inventory of billings, was written off in FY 1990-91. Clearly, customer management requires urgently action, with wider consequences for SONEL's operations. One of the areas directly affected is the investment in expansion of urban distribution systems. A rapid increase of the number of customers in Douala and Yaoundd without an efficient system to manage them is likely to produce large additional losses of revenues, thus reducing the returns on important investments either underway or in the planning stage. Financial Performance between 1984-85 and 1990-91 5.11 SONEL's financial statements, recast in the customary Bank format, are presented in Table 5-1 (Income Statement) and Table 5-2 (Balance). Owing to the information gaps noted in paras. 5.1 to 5.3, it was not possible to reconstruct meaningful funds flow statements for the same period. Since the data presented are identical to what SONEL has published, the qualifications and reservations expressed above remain applicable. Nevertheless, the statements do give a reasonable idea of major trends and of the impact of external events. 5.12 The average revenues per kilowatthour (Table 5-1) arise from the following tariff changes during the period: 35 Public sector: - 10 % effective mid-1986, no change in the tariff structure, - Approximately 11.2 % effective September 4, 1989, widely varying regional adjustments resulting from introduction of uniform national tariff; - Special HV contract with CICAM, July 1990. ALUCAM: Simplified new tariff effective January 1990, increase about 16 %. Total public sector revenues from electricity sales increased at an average annual rate of 7.5 percent, of which only 1.8 percent is attributable to sales volume. The record of expenses shows a successfull effort to contain and reduce costs. Total cash operating expenses increased by less than 10 percent in six years, mostly due to gradual reduction of moneys spent on supplies and a virtual freeze on the payroll expenses. The large depreciation and writeoffs ("provisions") should be viewed in conjunction with the item "reprise" under income credits and the balance sheet. The net total varies irregularly because of the incorporation of the Lagdo assets in the balance as of 1987-88 and the many adjustments "hors exploitation" in the following years. Apart from the one-time effect of Lagdo, net operating income shows a rising trend as a result of cost containment. 5.13 The fixed asset entries on the balance sheets (Table 5-2) are evidence of the vast expansion programme that was ongoing during the 1980's. During the period shown, SONEL completed the second stage of the Song Loulou power station (192 MW), the Mapd Reservoir, and important extensions of subtransmission and distribution systems throughout the country. The in( orporation of the Lagdo Dam and Power Station added about 60 billion FCFA to the gross assets in 1987-88. The counterpart of the net value was entered as equity, pending a settlement with Government on the responsibility for the debt service. Transfers from Work in Progress to Operating Assets have been irregular, and the breakdown by generation, transmission and distribution shows obvious inconsistencies and large unexplained corrections. Although the picture is incomplete without funds flow statements, the following data on annual investments give an impression of the extent of SONEL's construction activities (in billions of FCFA): 1984-85 17.26 1988-89 12.05 1985-86 31.65 1989-90 8.89 1986-87 24.30 (Estim.) 1990-91 6.05 5.14 The captital structure of SONEL continues to develop favorably. The utility's debt comprises a mix of borrowings from abroad, a significant volume of loans from local banks and buyer's credits related to the heavy investments of recent dates. The concessionary terms of foreign loans and the (at the time) controlled local interest rates have helped to keep the average cost of money down to about 6.5 percent in most years. On the other hand, the maturity structure is heavily influenced by the buyer's credits. As a result, the rate of repayment is high and long- term debt has grown only 10 percent during the period; the debt/equity ratio fell from 41/59 to 30170. 5.15 The accounts of current assets and liabilities are indicative of SONEL's severe liquidity problems of recent years. Around 1984-85, the onset of the economic crisis and the rapid shrinkage of Government resources entailed growing financial problems of central and local governments and many State-controlled institutions and enterprises. Because of underbudgeting and non-payment of electricity bills, consumer receivables almost tripled between 1984-85 and 1989-90, to an average of 7.2 months of billings (30 billion FCFA or US$ 109 million). Throughout most of this period, private consumers continued to pay on time and this category TABLE 5-1 SONEL: INCOME STATEMENTS 1984-85 TO 1990-91 (in billions of FCFA) FISCAL YEAR 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 REVENUES Sales Public sector 31.98 37.54 41.31 42.93 42.05 47.65 49.29 Special Customers 4.48 4.56 4.81 4.92 5.41 5.89 6.41 Subtotal electr.sales 36.46 42.10 46.12 47.85 47.46 53.54 55.70 Travaux remboursables 5.86 5.90 6.88 5.68 4.23 4.99 5.94 Revenue "hors expl." -1.24 0.41 0.88 -0.10 -0.24 1.30 1.22 Total Sales 41.08 48.41 53.88 53.43 51.45 59.83 62.86 Other credits Divers * 3.06 2.49 4.46 4.25 5.10 8.56 7.70 Reprise amort. 3.33 2.42 3.52 6.67 18.57 8.48 8.50 TOTAL REVENUES 47.47 53.32 61.86 64.35 75.12 76.87 79.06 EXPENSES Supplies 9.14 8.92 10.42 10.81 9.47 9.10 8.82 Personnel 11.32 13.24 14.04 14.63 13.61 13.54 13.49 Transport 0.53 0.42 0.40 0.34 0.29 0.25 0.27 Other services 6.06 7.44 7.06 5.89 4.79 5.38 4.75 Misc. & taxes 2.51 2.32 2.98 2.50 7.62 12.19 5.23 Subtotal cash op.exp. 29.56 32.34 34.90 34.17 35.78 40.46 32.56 Deprec. & writeoffs 13.58 14.00 18.94 26.64 30.28 26.42 35.47 TOTAL OPER. EXPENSES 43.14 46.34 53.84 60.81 66.06 66.88 68.03 NET OPERATING INCOME 4.34 6.98 8.02 3.54 9.06 9.99 11.03 Interest expenses 6.44 6.76 6.39 6.28 10.20 5.60 4.79 NET INCOME (LOSS) (2.10) 0.22 1.63 (2.75) (1.14) 4.39 6.24 REVENUES PER kWh (FCFAI Public sect. HV 15.67 17.19 18.04 19.73 18.27 27.63 24.99 MV 26.39 29.16 29.62 30.27 29.99 37.12 39.54 LV 45.13 48.08 49.14 50.27 49.52 54.17 56.48 Total 34.91 37.73 38.95 40.17 39.53 45.54 48.39 Special customers 3.60 3.64 4.24 4.09 4.07 4.42 4.81 ALUCAM 3.36 3.39 4.12 3.96 3.96 4.25 4.62 * Travaux faits par l'entreprise pour elle-m6me, frais A immobiliser, divers TABLE 5-2 SONEL: POSITION STATEMENTS 1984-85 TO 1990-91 (in billions of FCFA) FISCAL YEAR 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 ASSETS Net Fixed Assets Incorporelles 13.05 7.18 1.29 4.43 4.62 1.94 12.84 Corporelles Generation 59.91 58.01 55.16 106.85 140.07 129.86 170.44 Transmission 25.36 25.17 24.95 24.70 24.48 23.67 35.04 Distribution 34.48 35.02 33.93 32.55 61.87 72.57 23.77 Other 6.55 7.04 6.77 6.41 5.99 5.36 5.42 Subtotal 127.30 125.25 120.81 170.51 232.41 231.46 234.r" Work in Progress 21.36 48.43 70.47 88.16 28.78 27.'A 23.56 Current Cash & Banks 2.14 3.32 1.79 1.65 3.WN 12.27 21.09 Cons. receivables 11.65 15.52 18.45 25.99 -,.77 30.08 13.34 Other receivables 1.88 9.58 6.74 3.31 3.62 4.03 5.04 Inventories 4.84 6.72 7.51 1.b0 7.97 8.18 6.74 Comptes de r6gular. 2.10 2.28 2.75 2.62 2.96 1.81 3.64 Subtotal 22.61 37.32 V.24 42.07 45.94 56.39 49.85 TOTAL ASSETS 184.32 218.13 229.81 305.17 311.75 317.13 320.92 LIABILITIES Equity Paid-in Capital 39.43 51.21 52.12 122.38 123.94 126.33 126.65 Reserves+Ret.Pp:a. 0.89 1.11 2.74 0.00 -1.15 3.24 9.10 Provisionp 30.76 34.96 39.16 45.22 50.55 56.70 68.23 Total -_-quity 71.08 87.28 94.02 167.60 173.34 186.27 204.02 'et Long-term Debt 78.67 86.53 96.14 92.08 90.02 87.77 88.22 Current Liabilities L.T. Debt < 1 yr 10.14 9.40 10.17 12.19 19.55 18.92 11.55 Suppliers 9.62 14.75 10.04 8.36 7.30 4.33 6.32 other payables 2.71 3.69 3.88 7.14 2.70 4.83 3.99 Bank overdraft 9.12 13.72 12.64 13.88 7.14 0.30 0.58 Comptes de r6gular. 2.98 2.77 2.92 3.92 11.72 14.72 6.23 Subtotal 34.57 44.33 39.65 45.49 48.41 43.10 28.67 TOTAL LIABILITIES 184.32 218.13 229.81 305.17 311.77 317.13 320.92 38 accounted for less than 13 percent of the total outstanding. In the public .ector, substantial arrears were incurred by the State, the national water company SNEC. tl newly established television network CRTV, the railroad and the pilot training school ASEC CA. 5.16 Faced with steeply rising demand for working capital, SONEL resorted to running up large debts with its suppliers and expensive bank overdrafts reaching almost 14 billion FCFA (US$ 50 million) in 1987-88. The impact of the overdraft on net incon a can be seen in Table 5- 1: Interest expenses, which tended to be fairly constant, rose from 6 -illion FCFA to 10 billion FCFA in 1988-89. Meanwhile, revenues stagnated because of sluggi . sales growth and constant tariffs, and when receivables continued to escalate, SONEL suspend J payment of part of its debt service (while reducing its other short-term obligations). In 198 -90, arrears on interest and principal reached over 16 billion FCFA, includex. in the long-te' n debt less than one year and the "Comptes de Rdgularisation-Passif". 5.17 The financial crisis was resolved in mid-1990 mainly due to the tariff increase of September 1989, which paved the way for financial restru Euring agreements: (i) Elimination of FCFA 16 billion of arrears of the State by payment of FCFA 3.1 billion to SONEL (financed by a CCCE loan to the State) and rescheduling of the remaining FCFA 12.9 billion over about sever years; the State agreed to repay this amount in quarterly instalments of FCFA 477 - Ilion; (ii) Resumption by SONEL of the full debt s,rvice, including the part that the State was assumed to have paid under the provisions o' the Performance Contract, in return for the State conceding to SONEL the applicablL t iefits from rescheduling agreements with the Club of Paris; and (iii) A settlement of cross debts, under Nhich an old FCFA 5.9 billion loan of the State to SONEL is written off against bills f r current consumption of electricity by the State and the loan repayments under (i), ur .1 the balance is zero. This will be the case at the end of FY 1991-92. These measures left SONEL in a --althy position in mid-1991: Consumer receivables were down to about 3.9 months' billings, the bank overdraft had almost disappeared, short-term payables had returned to normal levels at d the long-term debt was again being fully serviced. The sharp increase of cash reserves in the Lst two years is indicative of the quick improvement. 5.18 Given the somewhat jubtful quality of the accounts, a year by year ratio analysis would not be too meaningful. The r.te of return on average net fixed assets is used here as the preferred yardstick of overall perfo mance. Based on calculations for two more or less "normal" years, 1985-86 and 1990-91, it i, estimated that SONEL earns about 4-5 percent on total net fixed assets, non-revalued. How rer, earnings are artificially depressed by the high "provisions de renouvellement" allowed unuer the concesssion system. If technical depreciation only were used, the rate of return woule be of the order of 9 to 10 percent. In fact, the lower official numbers can be viewed as pro .ies for returns in real terms, whereas the adjusted higher numbers are equivalent to nominal fir Ancial rates of return. 39 Financial Projections to 1994-95 5.19 In the following paragraphs the financial outlook of the next few years is developed for a base case incorporating many assumptions that are believed to be prudent. The . resulting scenario is used as reference point to discuss possible different outcomes. 5.20 Historically, SONEL has used an inflation rate of 8 percent, a number difficult to verify because of Cameroon's regime of controlled prices that is only now being liberalized. Probably the actual rate has gone down and, accordingly, a rate of five percent has been assumed as being more in line with the experience of other countries in the FCFA zone. Since the latest tariff increase has given SONEL the opportunity for rapid financial recovery, and there is room for further efficiency improvements, thz oresent tariff was kept constant until mid-1993, and only adjusted 5 % for the assumed inflation rate in the last two years of the forecast.The high voltage rate was not adjusted because the industries affected are hard-pressed and some, like CICAM, pay already a concessionary rate at Government insistence. These assumptions are implicit in the revenues per kilowatthour shown in Table 5-3 (projected income statements). 5.21 The estimated total revenue from electricity sales is derived from the foregoing tariff assumptions and the base forecast of the load in Chapter III and Annex 3.5. In the base year 1990-91, the consumption actually billed is only 87.4 % of the projected use; the difference consists of estimated commercial losses. The financial forecast assumes that the overall technical and commercial losses in the public system, now 24.4 percent of supply, will continue in the same proportions of 14.4 and 10.0 percent. This hypothesis may appear pessimistic, but thus far the customer management problems have proved to be so intractable, that it is considered a realistic approach for a base scenario. 5.22 On the expenditure side, the projections assume a continuation of SONEL's policies of cost control. Especially the payroll would not change if SONEL continues to reduce staff by attrition at a rate of about 150 per year. Supplies are shown for operation in normal water years; a severe drought in the Northern System could raise the fuel bill by up to two billion FCFA, but this risk is diminished by the actual volume of hydro storage reserves at Lagdo. The resulting cash operating expenses change little over four years. The total allowance for depreciation and writeoffs ("renouvellement") is taken as 7.25 % of average net assets, of which 3.6 % is assumed to represent technical depreciation of the predominantly hydroelectric system. The assumed average cost of borrowed funds is 6.5 percent, in line with experience. 5.23 The investments underlying the projected balance (Table 5-4) are shown in Chapter IV, Table 4-1. They have been entered without distinguishing the asset categories, since the breakdown on the balance sheets as reported by SONEL needs obviously some major corrections. The "Immobilisations Incorporelles" include the combined effect of long-term rescheduling of Government obligations (see par. 5.17) and capitalization of a three-year program of technical assistance by the CCCE through 1993-94. The development of long-term debt allows for some effect of rescheduling, but also for some offsetting new short-term obligations of SONEL to Government. 5.24 The most important implicit policy judgments relate to the current assets and, specifically, consumer receivables from the public sector. The financial clauses of the performance contract concerned not only the cleaning up of the stock of past accumulated debts, but also the mechanisms for budgeting and paying current consumption. The measures negotiated in 1990 have successfully dealt with the stock of debt of the central Government and, by means TABLE 5-3 SONEL: PROJECTED INCOME STATEMENTS 1990-91 TO 1994-95 (in billions of FCFA) 1990-91 1991-92 1992-93 1993-94 1994-95 REVENUES Sales Public sector 49.29 50.90 52.47 56.78 61.45 Special Customers 6.41 6.41 6.41 6.73 7.07 Subtotal electr.sales 55.70 57.31 58.88 63.51 68.52 Travaux remboursables 5.94 6.00 6.00 6.00 6.00 Revenue "hors expl." 1.22 0.00 0.00 0.00 0.00 Total Sales 62.86 63.31 64.88 69.51 74.52 Other credits Divers * 7.70 2.22 2.40 3.10 3.40 Reprise amort.** 8.50 0.00 -0.00 0.00 0.00 TOTAL REVENUES 79.06 65.53 67.28 72.61 77.92 EXPENSES supplies 8.82 9.00 9.63 10.30 11.03 Personnel 13.49 13.50 13.50 13.50 13.50 Transport *** 0.27 0.00 0.00 0.00 0.00 Other services 4.75 5.50 5.78 6.07 6.37 Misc. & taxes 5.23 4.50 3.50 3.50 3.50 Subtotal cash op.exp. 32.56 32.50 32.41 33.37 34.40 Deprec. & writeoffs** 3.4A7 23.44 2A_2 25.96 27.72 TOTAL OPER. EXPENSES 68.03 55.94 56.83 59.33 62.12 NET OPERATING INCOME 11.03 9.59 10.45 13.28 15.80 Interest expenses 4.79 6.07 5.73 6.16 6.19 NET INCOME (LOSS) 6.24 3.52 4.72 7.12 9.61 REVENUES PER kWh (FCFA) Public sect. HV 24.99 25.00 25.00 25.00 25.00 MV 39.54 39.54 39.54 41.52 43.59 LV 56.48 56.50 56.50 59.32 62.29 Total 48.40 48.44 48.47 50.87 53.40 Special customers 4.81 4.81 4.81 5.05 5.30 * Travaux faits par l'entreprise pour elle-mgme, frais & immobiliser, divers TABLE 5-4 SONEL: PROJECTED POSITION STATEMENTS 1990-91 TO 1994-95 (in billions of FCFA) 1990-91 1991-92 1992-93 1993-94 1994-95 ASSETS Net Fixed Assets Incorporelles 12.84 12.53 11.90 10.95 8.08 Corporelles Generation 170.44 Transmission 35.04 Distribution 23.77 Other 5.42 Subtotal 234.67 232.10 229.19 241.29 243.06 Work in Progress 23.56 20.21 19.96 20.73 22.11 Current Assets Cash & Banks 21.09 28.33 38.94 49.86 70.23 Cons. receivables 13.34 17.50 18.70 20.00 21.50 Other receivables 5.04 4.50 4.00 4.20 4.40 Inventories 6.74 6.75 7.22 7.72 8.27 Comptes de r6gular. _.4A 5.20 6.82 8.73 10.64 Subtotal 49.85 62.28 75.68 90.51 115.04 TOTAL ASSETS 320.92 327.12 336.73 363.48 388.29 LIABILITIES Equity Paid-in Capital 126.69 127.49 128.32 129.22 130.22 Reserves+Ret.Earn. 9.10 12.62 17.34 24.46 34.07 Provisions 68.23 80.03 92.16 104.91 118.38 Total equity 204.02 220.14 237.82 258.59 282.67 Net Long-term Debt 88.22 81.27 76.61 83.74 84.12 Current Liabilities L.T. Debt < 1 yr 11.55 10.00 9.50 9.00 9.00 Suppliers 6.32 6.00 4.80 5.15 5.50 Other payables 3.99 3.75 3.50 3.50 3.50 Bank overdraft 0.58 0.00 0.00 0.00 0.00 Comptes de r6gular. 6.23 5.96 4.50 3.50 3.50 Subtotal 28.67 25.71 22.30 21.15 21.50 TOTAL LIABILITIES 320.92 327.12 336.73 363.48 388.29 42 of cross debt compensation, current consumption was settled for 1990-91 and the first few months of 1991-92. However, the provisions for payment of current consumption by Government have remained ineffective, and the central Government has shown itself incapable to influence the relations of municipalities ("Communes") and parastatal enterprises with SONEL. Consequently, there is considerable risk of a new accumulation of arrears. The consumer receivables in Table 5-4 were derived as follows: Customer Category 1991-92 1992-93 1993-94 1994-95 Private Sector 5.00 5.20 5.50 6.00 Central Government 2.00 3.00 4.00 5.00 Communes (Loc.Govt) 1.50 1.50 1.50 1.50 Autonomes 4.50 4.50 4.50 4.50 SNEC .504 AJQ 4.5 TOTAL 17.50 18.70 20.00 21.50 In other words, the private sector will maintain normal levels for commercial operations, the Central Government will fall slowly behind and the parapublic enterprises and institutions will maintain their current backlog, but pay at least their current consumption. The forecast also assumes that the Government payments under the rescheduling agreement will accumulate as short-term receivables when the compensation agreement runs out. 5.25 Despite the foregoing prudent assumptions, the projected balance indicates a continuation of the trend to improvement and strengthening of SONEL's financial position. The debt/equity ratio at the end of the forecast period would be only 23/77. In 1994-95, the nominal rate of return on average fixed assets would be 6.4 percent but without the renewal provision, the financial rate of return would reach 11.9 percent. These positive expectations are further highlighted by the funds flow statement on Table 5-5. It shows the debt service coverage ratio to stay in the 2 to 3 range. Based on projected long-term borrowings, SONEL would self-finance on average 45 percent of its investments during the four-year period, well below the amounts of internal cash generated. Since the long-term debt and debt service remain at low levels, and SONEL pays neither income taxes nor dividends, the technical result of the exercise is a substantial accumulation of cash suggesting, in fact, a continuation of the actual developments since mid-1989. 5.26 This highly favorably outlook should be modified to take into account other risks and contingencies: (i) The status of Lagdo is settled only in part by the addition of the plant to SONEL's assets. There is still a question of SONEL taking over the Chinese loans that financed the construction and that are until now serviced by Government. The amount is unknown, but if half of the project had been financed by grants, there may still be about 25 billion FCFA of loans outstanding; (ii) In the Northern System, construction is proceeding on the transmission line Lagdo- Ngaoundr6 and on the subtransmission and distribution system of the City of Ngaounddrd and environs. The two projects, estimated to cost 15.6 billion FCFA, are being built with 100 % Spanish turnkey financing. Although they have been launched as Government undertakings, it is likely that SONEL will eventually be obliged to integrate the assets and debts in its balance sheet. Since the utility is already a supplier of the 43 service area concerned, such a transaction will increase net costs (composed of added capital charges less fuel savings), but not revenues; (iii) The apparent incapability of the central Government to bring order in the financial affairs of municipalities and parastatals could lead to a rise of receivables more rapid than projected. The experience of the 1980's shows that an increase of 15 billion FCFA in four years cannot be excluded. The combined effect of the factors listed above could increase the long-term debt from 100 to about 140 billion FCFA, the debt service by 4.5 billion FCFA per year and a raise the amount of receivables to about the level of 1989-90. The reduced income and growing needs for working capital would make half of the "Cash & Banks" entry projected for 1994-95 disappear. 5.27 Besides concerns about short-term risks and contingencies, the long-term financial health of SONEL should be watched. Given Cameroon's resource base, hydro power will form the backbone of its future supply. Although hydro is attractive as an inflation-proof energy resource, it has become most difficult to finance by borrowing because the repayment period of power loans (17-20 years) remains far below the service life of the assets (35 years for electromechanical equipment and 50-75 years for civil works). A substantial percentage of self- financing thus becomes imperative, and from this viewpoint the financial strength of SONEL should be carefully guarded. 5.28 On the positive side, the assumed high level of commercial losses implies that, potentially, revenues from the public sector segment of the power market (i.e. excluding ALUCAM) could be increased by 7 to 8 billion FCFA per year (US$ 25 to 29 million). A determined effort to streamline customer management would go a long way to strengthen SONEL's financial position further and equip the utility to cope with other possible external upsets. The basically positive outlook also ought to create a favorable climate to examine changes in corporate ownership that would enhance the efficiency of the public service. Table 5-5 SONEL: PROJECTED FUNDS FLOW STATEMENTS 1991-92 TO 1994-95 (in billions of FCFA) FISCAL YEAR 1991-92 1992-93 1993-94 1994-95 Total SOURCES Net Operating Income 9.59 10.45 13.28 15.80 49.12 Depreciation 23.44 24.42 25.96 27.72 101.54 Gross internal cash generation 33.03 34.87 39.24 43.52 150.66 Variation working capital 6.61 5.69 4.56 3.81 18.76 Debt service: - Interest 6.07 5.73 6.16 6.19 24.15 - Principal 11.55 10.00 9.50 9.00 40.05 - Subtotal debt service 17.62 15.73 15.66 15.19 64.20 Net internal cash generation 8.80 13.45 19.02 24.52 65.79 CAPITAL INVESTED 7.32 10.41 27.04 16.44 61.21 Balance: -1.48 -3.04 8.02 -8.08 -4.58 financed by: - Customer contributions 0.80 0.83 0.90 1.00 3.53 - Long-term borrowings (foreign) 3.05 4.84 16.13 9.38 33.40 Loan Repayment by Government 1.91 1.91 1.91 1.91 7.64 Total capital sources 5.76 7.58 18.94 12.29 44.57 Cash variation 7.24 10.62 10.92 20.37 49.15 Cash begin year 21.09 28.33 38.94 49.86 Cash end year 28.33 38.94 49.86 70.23 Yearly NICG (%) 146 129 70 149 Debt service ratio 1.9 2.6 2.5 2.9 45 VI. SECTOR POLICY ISSUES Structural Adjustment and Performance Contracts 6.01 The growing economic problems of Cameroon since 1983 and their consequences for SONEL and other public enterprises led the Government and the donor community to reflect on the needs for restructuring of the economy and, in that context, on the rehabilitation of the financial sector and of major State enterprises. A diagnostic study of SONEL, in which the CCCE took a leading role, resulted in a Performance Contract between the State (represented by the Minister of Mines, Energy and Water) and SONEL, signed on June 22, 1989. 6.02 The contract spells out the mutual obligations of the State and of SONEL for a four-year period ending June 30, 1993. Since it was drawn up in the middle of a major financial crisis, the provisions show a heavy emphasis on settlement of arrears and on preventing their recurrence. However, the Performance Contract is clearly seen as a more durable instrument, because its renewal is anticipated six months before the expiration date. The present document addresses successively: (i) the an!nual management objectives to be attained by SONEL; (ii) the obligations of the State; and (iii) the obligations of SONEL. 6.03 The principal management objectives (Art.6) concern the number of customers, overall losses in the systems (including ALUCAM and other special customers), personnel, customer receivables and finance. So far, the targets have been met or exceeded except for the investment program which, however, was not considered final at the time of Contract signature. The pace of expenditures on new construction remained far below the ceilings, and there was a corresponding improvement of SONEL's overall financial situation. The Contract (Art.7) requires SONEL also to improve management of customers and inventories, within the framework of a modernization of the entire information management system, all before the end of the Contract. Thus far, progress on those matters appears to be slow. 6.04 As noted in par. 5.17, the State has complied with the obligations concerning liquidation of past debts (including rescheduling), but the provisions for regular payment in instalments of current bills have not been implemented. Neither has the State been able or willing to exercise much influence on parastatal organizations and enterprises to liquidate outstanding arrears and to avoid a new accumulation. In Article 12, the State undertakes not to impose investments on SONEL that cannot be economically justified. The transmission line Lagdo - Ngaound6r6 and the associated distribution project, together costing 15.6 billion FCFA (US$ 57 million) appear fall in that category. Although the transmission line was in the preliminary investment program of the Contract, it has never been made clear why the project should go ahead in the middle of a financial crisis, for account of the State. The role of SONEL is limited to supervision of construction, but logically the utility will end up shouldering the full financial burden of a project not of its choosing. 6.05 Helped by the tariff increase of September 1989, SONEL has taken care of its financial obligations under the Contract in a creditable manner. Notable are also the measures to control costs and to release redundant staff graduallly without causing social disruption. The reported frequent delays in actions to improve customer accounts leave serious doubts about SONEL reaching acceptable results by mid-1993. 6.06 On balance, the Performance Contract is serving a useful purpose in exercising pressure on both parties to take priority actions and to meet regularly to assess the situation. A 46 small but competent staff of the Ministry of Energy. Water and Mines efficiently monitors the results at six-month intervals. It is not clear whether the Contract is strengthening or supplanting the Board of Directors. The effectiveness of the Board, being the statutory instrument of supervision, should be increased, and for the Board the Performance Contract should be just one of its instruments to monitor the management of SONEL; it is no substitute for policy direction. 6.07 The next version of the Performance Contract, to be ready by the end of 1992, should sharpen the focus of quantitative objectives and aim at redressing the short-term problems that have not found a solution yet. Specifically: (uantitative Objectives could include a gradual reduction of SONEL staff from the present 3700 to 3000 by 1996/97; reduction of the loss percentage in the public sector (i.e. excluding ALUCAM) from 24 % to 18 % over the same period; reduction of SONEL's receivables by the four major categories (private sector, State, State-owned public enterprises and municipalities); and an investment program for which SONEL would be fully responsible. - Oblizations of the State should spell out (i) the administrative measures that Government will take to comply with the quantitative objectives concerning receivables; (ii) deadlines to settle all transfers of power sector assets to SONEL; (iii) definition of SONEL's corresponding debt service obligations; and (iv) affirmation of SONEL's exclusive responsibility for preparation of new investments. - Obligations of SONEL should include: (i) an undertaking to institute long form audits of its financial records within six months of the end of the fiscal year, by an international accounting firm; and (ii) a timetable for precise targets to be achieved in the reorganization of customer management, informatics, and any remedial measures needed to obtain certification of the accounts. The Aluminium Industry 6.08 As shown on the income statements (Table 5-1), ALUCAM contributes 10 to 11 percent of SONEL's revenues from electricity sales, while it consumes about 55 percent of total sales. This situation has given rise to repeated demands for tariff increases that would almost triple ALUCAM's energy costs. The 16 percent increase of January 1990 (to about FCFA 4.6 or US$ 0.017 per kilowatthour) has not alleviated these concerns. The recurrent debate on this issue does not take into account some basic facts, and it risks to detract attention from more pertinent questions. In judging the ALUCAM situation, one should weigh at least the following factors: (i) Aluminium smelters throughout the world depend on inexpensive electricity. Even a tariff increase well below the numbers suggested would make little difference to SONEL's revenues while putting ALUCAM out of business; (ii) The cost of maintaining ALUCAM's tariff at a competitive level should be weighed against the contribution of the industry to the national economy. The National Energy Plan (see below) estimates that the industry, per year, generates a value added of 27 billion FCFA (US$ 100 million), adds 10 billion FCFA (US$ 36 million) to State revenues and provides employment to 1500 persons. Since such considerations guide Governments in industrialized countries having aluminium smelters, it would be unrealistic to expect Cameroon to ignore them; 47 (iii) The establishment and subsequent expansion of ALUCANI was instrumental in the initial large-scale development of Cameroon's hydroelectric resources. The public sector has definitely reaped benefits from economies of scale that would not have been possible otherwise. Even today, such benefits are not yet exhausted: The turbine discharge capacity at Edea (1309 m3/s) is well in excess of the dry season regulated flow of the Sanaga (850 m'/s). Therefore, the existence of the power dam at Edea will enhance the value of any additional storage upstream that will be necessary at some future date. In conclusion, it would seem advisable to assess the existing arrangements for ALUCAM in a macro-economic context, and to consider any plans for future smelter expansion in the same framework. The prospects of obtaining more value-added by new fabricating facilities should be an integral part of such an evaluation. The National Energy Plan - Phase 1 6.09 In late 1988, the Government decided that Cameroon needed a long-term strategy and energy plan encompassing all subsectors (hydrocarbons, electricity, biomass and other forms of renewable energies). The implementation was launched by staff of MINMEE, assisted by the Bank-UNDP sponsored Energy Sector Management Assistance Programme (ESMAP) and outside consultants. The first phase, financed by the Agence Canadienne de D6veloppement International (ACDI), was completed in December 1990 with the publication of Volume 1 of the National Energy Plan. It contains a diagnosis of the entire sector and a broad outline of policy recommendations. 6.10 Part I of the report provides a sector overview bringing together a wealth of information on country background, resources, existing supply and demand, the place of energy in the economy, pricing, energy conservation, environment and institutions. Part II projects energy demand in all subsectors until the year 2010 under various economic scenarios, and analyses the supply-demand balance. The demand forecasts (three scenarios) appear to have been based on macroeconomic modeling, with some disaggregation by major sectors. In such a global approach the distinction between the public segment of the power sector (which is still growing) and the stationary ALUCAM segment is lost. Consequently, even the lowest annual growth rate for the electricity market as a whole, being 4 percent, is equivalent to a growth of over 7 percent per year of the public sector. The resulting overestimation of future demand by a substantial margin invalidates some planning recommendations. The concluding Part III sketches the broad policy outlines and the recommended actions for implementation. The Energy Plan merits a critical review, but nevertheless it is on the whole a document of good quality, representing an important effort by an African country to come to grips with all aspects of its energy problems. Regrettably, since its publication, the National Energy Plan has remained in the background while the attention of Government and cofinanciers was focused on the more immediate problems of public finance and their implications for the energy sector, and especially for the hydrocarbons subsector. 6.11 The following paragraphs summarize some important elements of the National Energy Plan concerning the power subsector. Pertinent comments are incorporated in the last section (Issues for Phase 2) of this chapter. The five main axes of policy and major recommendations for the power subsector, as developed in Part III, are: 48 (i) Preservation of Energy Independence and Development of international Exchanges. The Plan recommends: - Construction of large hydro projects for export which, due to economies of scale, would attract energy-intensive industries; - Completion of the resource inventory to identify mini- and micro sites; - Restriction of thermal power to isolated load centers. (ii) Increasing the access of urban and rural populations to electricity. The Plan reasserts the known objective of the Government to use energy as a policy tool in the framework of social dimensions of adjustment, including access to electric power by all social strata, retarding the rural exodus, encouragement of agricultural productivity and promotion of cottage industries. Among the means to attain this objective the Plan mentions: - Pricing that takes into account the economic costs and the financial constraints of SONEL, but that also may include a surcharge to promote the social objectives of the Government; - Formulation of a master plan for rural electrification; - Reducing the cost of distribution investments by the choice of appropriate technology. (iii)Use of Energy to stimulate the Economy and Employment. The recommended measures include: - Develop national establishments for consulting services and for the manufacture of light equipment; - Participation of industry in the financing of new facilities. (iv) Improved Demand and Supply Management, Preservation of the Environment and Promotion of Safety. The efficiency measures in the electricity subsector are similar to those in the Performance Contract, and include notably the imperative of reducing distribution losses to acceptable levels. (v) Improvement of the Effectiveness of the legal, regulatory and institutional Framework, and of the financing Mechanisms of the Sector. The objectives in the power subsector include more autonomy for SONEL and opening up of the subsector to participation of private capital. The means of implementation include: - Strict application of the provisions of the Performance Contract; - Avoidance of unwarranted Government interference - Completion of the (numerous) decrees and orders-in-council planned at the time of adoption of the Electricity Law of 1983; - Establishment of a National Energy Commission and of a National Energy Conservation Office. Issues for Phase 2 of the NEP (Implementation) 6.12 Although, in retrospect, the ambitious investment program of the 1980's has left Cameroon with excess generation capability over the medium term, the resulting debt burden for SONEL remains quite manageable. This combination of circumstances provides the utility now with an excellent opportunity to expand consumer markets through relatively modest new investments in subtransmission and distribution, while holding the line on tariffs. Thus, SONEL can make a significant contribution to Cameroon's economic recovery. 49 6.13 Generation planning for the longer term should not be neglected, but it needs a better focus. Cameroon's vast hydro resources can provide electricity at low unit costs, but most of the projects in this category are much too large for the foreseeable needs of the public sector. For their early development they need large energy-intensive industries that could finance most of the costs by building hydro power stations as enclave projects. It is important that Government has sufficient knowledge of such prospects to be able to attract new industries, but costly detailed investigations are not warranted. The perspectives for large-scale exports should not be over- estimated, given the fact that Cameroon would have to compete against other potential producers owning vast reserves of natural gas or hydro power resources. 6.14 The generation planning for the domestic needs of the public sector should be re- oriented. As part of the past planning for high growth, the Nachtigal Amont and Warak projects have been studied to feasibility level or beyond. The implementation of neither one is urgent, and it would be opportune to examine now which smaller projects could be inserted in the expansion programs before launching the larger developments. In that context it should be noted that a resource inventory is seldom exhaustive. In the case of Cameroon, it has identified the large energy-producing sites and storage prospects but, as is made clear in the reports, more work is necessary. Followup activities should be guided by the characteristics of the existing systems, to enhance their efficiency and to firm up as much secondary energy as possible. This work seems to be more urgent than the surveys of mini- and micro hydro sites recommended in the NEP. It does not seem advisable to rule out a priori the addition of thermal power in the interconnected systems. Wherever large quantities of secondary hydro energy exist, complementary thermal power merits investigation, in conjunction with other possible markets for natural gas. 6.15 Although at present no comprehensive studies of major sites are warranted, there is an aspect of long-term development that merits attention soon. The future supply of economically attractive firm hydro power depends to a large extent on hydraulic regulation, which is often provided by only one or two strategically located reservoirs in a river basin. The least expensive storage is frequently provided by low dams inundating large areas of flat terrain that tends to attract agriculture and population settlements. Experience elsewhere in the world has shown that many good sites are lost by uncontrolled encroachment that drives up resettlement costs to the point that a project must be abandoned. In Cameroon, there is still time to examine the important storage sites now with a view to declare the land to be flooded at some future date of public utility. Indifference or delay on the part of the authorities could turn out to be extremely costly for the country. 6.16 The efficient expansion of electricity service to the population depends on choice of appropriate technology and on customer management that, taken together, ensure high standards of service and hold technical and commercial losses to a minimum. They are also indispensible pre-conditions for the planning, financing and implementation of distribution investments having an acceptable rate of return, and for tariff levels that encourage connections rather than act as barriers. The NEP makes these points indirectly, but the actions therein recommended emphasize social Government objectives without being too clear about the fact that, at times, these may conflict with economic objectives and/or financial possibilities. Policy benefits should, as much as possible, be compared explicitly with policy costs. 6.17 Among the social objectives, Rural Electrification (RE) is prominent. Since RE usually entails high investments having low returns, the policy aspects merit careful thought. Judging from experience in Cameroon and elsewhere in Africa, full attention should be given to problems of definition and of criteria to establish priorities, for example: What is the census 50 definition of "rural" and "urban"? Is "rural" in the planning context associated with agriculture, with electrification of small secondary urban towns or simply with small centers of central and regional Government administration? Is the guiding principle the provision of electricity for productive use and, if so, what are the local productive economic activities? If the emphasis is on consumptive use, do the local income levels justify RE? Finally, in view of the substantial efforts already spent on RE, it would be pertinent to make systematic ex post evaluations of RE projects to learn from direct experience. 6.18 Prudent financial management ought to be pursued diligently. As the Comit6 de Suivi for the Performance Contract has emphasized repeatedly, SONEL remains financially vulnerable, and a premature plunge into large projects under outside pressure could quickly undo the notable improvements of the last three years. InternallN. a radical overhaul of the accounting and management information systems seems required. The technical assistance effort underway should work towards precise objectives and timetables and external audits should be instituted immediately. The internal audits should be broadened in scope and the service directly attached to the Direction G6ndrale. 6.19 The relations between SONEL and the State merit a thorough re-evaluation. The present concession system stems from the concept that private capital operates publicly owned assets. The nationalizations of virtually all power companies in the franc zone after independence have made the State both owner and concessionaire, thus removing the rationale for a concession system. In practice, the system appears to work in the sense that it protects the utility management against too much interference of Government in day-to-day operations. On the other hand the most serious drawback, being the ambiguity with regard to investment planning, is much in evidence in Cameroon. The investment decisions on major projects can be traced to Government rather than objective independent studies and proposals submitted by SONEL to Government for approval. Unsolicited promotions by foreign interests further complicate the process. The planning of new large investments is characterized by lack of transparency and of accountability. Without clearly defined responsibilities of the Government and SONEL, regulation and supervision is weak, and further complicated by the potential intervention of at least four ministries: MINMEE for technical control, MINDIC for tariffs, MINPAT for foreign financing, and MINFI for financial control. 6.20 The transformation of SONEL in a Socidt6 d'Economie Mixte charged with the public service would end the ambiguity of the concession system and put the responsibility for development of the power sector with a single institution. As in many other African countries, public service could encompass the monopoly of transmission and distribution. In the field of generation, room should be left for private development, in particular for privately owned hydro power under restrictions less severe than the ones currently in force. The public service would be governed by a single electricity law and the accompanying decrees of its application, under responsibility of MINMEE, through which the interventions of other Government ministries and entities would be channeled. The State could initially retain majority ownership of SONEL's shares but, in principle, the ownership base could be broadened by selling shares to corporate and individual private interests, which at the same time would help develop the national securities market. Of course, the financial and commercial practices should have sufficiently improved to guarantee private investors an acceptable return. Other ideas to be explored are the establishment of partially owned SONEL subsidiaries charged with large urban distribution systems and of cooperatives that would co-finance rural electrification schemes. 51 6.21 The powers of SONEL's Board of Directors ought to be more effectively exercised by drawing its membership from a larger constituency in which private producers and consumers are better represented, by more extensive reporting of management to the Board, by external audits and by accessible proceedings. A good two-way communication between the management and the Board would give SONEL the needed policy direction and facilitate the task of MINMEE. Many working arrangements can be implemented through performance contracts, as is the case already. However, it should be recognized that these pragmatic and transitory instruments are no substitute for a lasting legal framework. 6.22 The need for institutional reform is accentuated by the fiscal constraints on the Government. It would appear that the days of massive State subsidies are over, and the sooner SONEL's financial autonomy and responsibility is enshrined by law, the better. From a regulatory standpoint, this task could be accomplished within a relatively short timespan, because the existing 1983 law is only a bare-bones outline of principles, and the elaboration of the many planned Decrets d'Application is not far advanced. 6.23 The principle of the NEP recommendations concerning establishment of a National Energy Commission (NEC) and of a National Energy Conservation Office (NECO) should be supported. Following the model in many industrialized countries, the implementation could be effected by establishing a National Energy Board (NEB) as a semi-autonomous agency charged with the regulation of the sector. Such an NEB would be answerable to the Legislative Assembly through the Minister of Mines, Water and Energy. The Board operations could be financed out of small levies on the entities to be regulated and thus be assured of the means to attract competent staff and to avail itself of independent outside advice. 6.24 In order to maintain the momentum of the internal and external policy dialogue set in motion with the National Energy Plan, it is important that Government and donor community find the means to continue with the elaboration of Phase 2 as soon as possible. 9. CA MEROUN DECOUPAGE ADMINISTRATIF TCIIAD Maroua - Limites provinciales - Zones Agroécologiques et Energétiques EXT. NORD - Coton • Elevage - Café Cacao - Tabac Garoua [ ] Zone non classée NORD NO S Ngaoundere ADAMOUA DEPARTEMENT? NON CLASSE .. CENTR AFRIQUE UD-OUESTr CENTRE Btfoussa n Douala Yaoundé- EST« Ebolowa SUD OC N ATLANTIQUE EQUATORIALE GABON CONGO CONSEIL D'ADMINISTRATION DIRECTEUR GENERAL DIRECTEURS-GENERAUX ADJOINTS Production Comptable Direction Secretaire Etudes Informati Transport Distribution Finance Administrative Général Générales Equipement Délégations Régionales D.R.N.O. D.R.S.O. D.R.L.O. D.R.C.S.E. D.R.N.E.A.I Attaché Product ion Attaché Transport Distribution Attaché Administration ANNEX 3.1 CAMEROON POWER SECTOR TOTAL GENERATION AND SALES 1978/79 - 1990/91 Year Total S a 1 e s HV gen. Public Sector gen. HV Edea HV Other MV/LV Total Edea Gen. Sales Losses GWh GWh GWh GWh GWH GWh GWh GWh % (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 78-79 1385.1 835.8 0.0 482.0 1317.8 852.9 532.2 482.0 9.4 79-80 1387.9 759.9 0.0 535.4 1295.3 775.4 612.5 535.4 12.6 80-81 1655.0 949.2 3.2 584.9 1537.3 968.6 686.4 588.1 14.3 81-82 2147.6 1344.2 8.6 664.9 2017.7 1371.7 775.9 673.5 13.2 82-83 2160.5 1241.3 23.8 762.1 2027.2 1266.6 893.9 785.9 12.1 83-84 2156.5 1150.7 35.5 775.4 1961.6 1174.2 982.3 810.9 17.4 84-85 2383.3 1245.0 40.6 875.5 2161.1 1270.4 1112.9 916.1 17.7 85-86 2498.0 1252.3 44.1 950.8 2247.2 1278.0 1220.0 994.9 18.4 86-87 2459.0 1132.1 42.6 1022.2 2196.9 1155.2 1303.8 1064.8 18.3 87-88 2557.0 1202.2 37.8 1032.8 2272.9 1226.8 1330.2 1070.6 19.5 88-89 2689.6 1330.2 38.6 1024.9 2393.7 1357.3 1332.3 1063.5 20.2 89-90 2702.3 1331.1 54.0 992.5 2377.5 1358.3 1344.0 1046.5 22.1 90-91 2707.6 1333.1 48.5 969.8 2351.4 1360.5 1347.1 1018.5 24.4 Average annual Growth Rates (%) 78-79 to 87-88 8.8 10.7 9.3 87-88 to 90-91 -2.1 0.4 -1.6 Explanatory notes (3) comprises HV sales to ALUCAM, SOCATRAL and CELLUCAM (4) comprises HV sales to CIMENCAM, CICAM and SONARA (6) = (3)+(4)=(5) (7) = (3)/0.98, to allow for imputed losses related to direct deliveries to HV custc at Edea. (8) = (2)-(7) (9) = (4)+(5) (10) = ((8)-(9)]/(8), expressed as percentage Annex 3.2 SONEL: REGIONAL DISTRIBUTION OF LOW VOLTAGE SALES (energy in GWh) Division F i s c a 1 Y e a r s Growth (%) 78/79 87/88 90/91 78/79 87/88 to to 87/88 90/91 1. Total Sales DRCSE 63.3 168.1 169.4 11.5 0.2 DRLO 132.7 303.4 318.7 9.6 1.7 DRSO 7.2 20.5 24.2 12.2 5.6 DRNO 2.7 12.9 12.2 19.1 -1.7 DRNEA 14.8 46.0 48.9 13.4 2.1 TOTAL 220.8 550.9 573.4 10.7 1.3 2. Major Urban Markets * DRCSE 55.9 133.1 131.9 10.1 -0.3 DRLO 119.5 263.0 277.2 9.2 1.8 DRNEA 12.8 35.8 36.5 12.1 0.6 TOTAL 188.2 431.9 445.6 9.7 1.0 3. Smaller Urban and Rural Markets DRCSE 7.4 35.0 37.5 18.8 2.3 DRLO 13.2 40.4 41.5 13.2 0.9 DRSO 7.3 20.5 24.2 12.2 5.6 DRNO 2.7 12.9 12.2 10.7 -1.7 DRNEA 2.0 10.2 12.4 19.8 6.7 TOTAL 32.6 119.0 127.8 15.5 2.4 * DRCSE: Yaound6; DRLO: Douala, Bafoussam; DRNEA: Ngaound6r&, Garoua, Maroua Annex 3.3 SONEL: REGIONAL DISTRIBUTION OF LV CUSTOMERS (in thousands) Division F i s c a 1 Y e a r s Growth (%) 78/79 87/88 90/91 78/79 87/88 to to 87/88 90/91 1. Total DRCSE 33.9 85.7 101.7 10.9 5.9 DRLO 52.0 137.4 160.8 11.4 5.4 DRSO 6.5 16.0 22.5 10.5 12.0 DRNO 2.3 12.0 20.6 20.1 19.7 DRNEA 7.9 27.6 32.4 14.9 5.5 TOTAL 102.6 278.7 338.0 11.7 6.6 2. Major Urban Markets * DRCSE 26.2 55.5 64.4 8.7 5.1 DRLO 38.4 89.9 105.1 9.9 5.3 DRNEA 6.3 18.2 20.6 12.5 4.2 TOTAL 70.9 163.6 190.1 9.7 5.1 3. Smaller Urban and Rural Markets DRCSE 7.7 30.2 37.3 16.4 7.3 DRLO 13.6 47.5 55.7 14.9 5.5 DRSO 6.5 16.0 22.5 10.5 12.0 DRNO 2.3 12.0 20.6 20.1 19.7 DRNEA 5.6 9.4 11.8 5.9 7.9 TOTAL 31.7 115.1 147.9 15.4 8.7 * DRCSE: Yaound6; DRLO: Douala, Bafoussam; DRNEA: Ngaound6r6, Garoua, Maroua Annex 3.4 SONEL: REGIONAL VARIATION OF CONSUMPTION PER LV CUSTOMER (in kilowatthours per year) Division Fisca 1 Years Growth (%) 78/79 87/88 90/91 78/79 87/88 to to 87/88 90/91 1. By Operating Divisions DRCSE 1867 1961 1666 0.5 -5.3 DRLO 2552 2208 1982 -1.6 -3.5 DRSO 1108 1281 1076 1.6 -5.6 DRNO 1174 1075 592 -1.0 -18.0 DRNEA 1873 1667 1509 -1.3 -3.3 TOTAL 2152 1977 1696 -0.9 -5.0 2. Major Urban Markets * DRCSE 2134 2398 2048 1.3 -5.1 DRLO 3112 2925 2637 -0.7 -3.4 DRNEA 2032 1967 1772 -0.4 -3.4 TOTAL 2654 2640 2344 -0.1 -3.9 3. Smaller Urban and Rural Markets DRCSE 961 1159 1005 2.1 -4.6 DRLO 970 850 745 -1.5 -4.3 DRSO 1108 1281 1076 1.6 -5.6 DRNO 1174 1075 592 -1.0 -18.0 DRNEA 357 1085 1051 13.1 -1.1 TOTAL 1028 1034 864 0.1 -5.8 * DRCSE: Yaound6; DRLO: Douala, Bafoussam; DRNEA: Ngaound6r6, Garoua, Maroua ANNEX 4.1 LOAD FORECAST 1990/91 TO 2004/05 (BASE CASE) (Energy in GWh) INTERCON NECTED SY STEMS Southern Northern Eastern TOTAL LV MV Total LV MV Total LV MV Total BASE YEAR 1990/91 1. Reported Sales 515.8 353.1 868.9 36.2 36.4 72.6 7.0 2.2 9.2 2. Future loads 1.7 0.1 1.8 12.7 4.6 17.3 3. Service areas 517.5 353.2 870.7 48.9 41.0 89.9 7.0 2.2 9.2 969.8 4. Est. comm.losses 71.9 49.1 121.0 6.8 5.7 12.5 1.0 0.3 1.3 134.7 5. Est. LV/MV use 589.4 402.3 991.7 55.7 46.7 102.4 8.0 2.5 10.5 1104.5 6. HV sales 26.1 22.4 0.0 48.5 7. Total est. use 1017.8 124.8 10.5 1153.1 8. Est. techn. loss 171.2 21.0 1.7 193.9 9. Generation reqOd 1189.0 145.8 12.2 1347.0 10.Peak Loads (in MW) 224.3 24.8 3.1 1994 - 1995 11.Est. LV/MV use 676.4 444.1 1120.5 63.9 51.5 115.4 9.4 2.8 12.2 1248.1 12.HV Sales 30.0 25.0 55.0 13.Total Sales 1150.5 140.4 12.2 1303.1 14.Generation req'd 1344.0 164.0 14.3 1522.3 15.Peak Loads (in MW) 253.6 27.9 3.6 1999 - 2000 16.Est. LV/MV use 842.9 540.3 1383.2 81.6 62.7 144.3 12.6 3.9 16.5 1544.0 17.HV Sales 45.0 30.0 75.0 18.Total Sales 1428.2 174.3 16.5 1619.0 19.Generation req'd 1668.5 203.6 19.3 1891.4 20.Peak Loads (in MW) 314.8 34.7 4.9 2004 - 2005 21.Est. LV/MV use 1050.4 657.3 1707.7 104.1 76.3 180.4 16.8 5.4 22.2 1910.3 22.HV Sales 60.0 40.0 100.0 23.Total Sales 1767.7 220.4 22.2 2010.3 24.Generation req'd 2065.1 257.5 25.9 2348.5 25.Peak Loads (in MW) 389.7 43.9 6.6 ANNEX 4.2 LOAD FORECAST 1990/91 TO 2004/05 (HIGH SCENARIO) (Energy in GWh) INTERCON NECTED SY STEMS Southern Northern Eastern TOTAL LV MV Total LV MV Total LV MV Total BASE YEAR 1990/91 1. Reported Sales 515.8 353.1 868.9 36.2 36.4 72.6 7.0 2.2 9.2 2. Future loads 1.7 0.1 1.8 12.7 4.6 17.3 3. Service areas 517.5 353.2 870.7 48.9 41.0 89.9 7.0 2.2 9.2 969.8 4. Est. comm.losses 71.9 49.1 121.0 6.8 5.7 12.5 1.0 0.3 1.3 134.7 5. Est. LV/MV use 589.4 402.3 991.7 55.7 46.7 102.4 8.0 2.5 10.5 1104.5 6. HV sales 26.1 22.4 0.0 48.5 7. Total est. use 1017.8 124.8 10.5 1153.1 8. Est. techn. loss 171.2 21.0 1.7 193.9 9. Generation req'd 1189.0 145.8 12.2 1347.0 10.Peak Loads (in MW) 224.3 24.8 3.1 1994 - 1995 11.Est. LV/MV use 744.1 507.9 1252.0 73.0 61.2 134.2 10.9 3.4 14.3 1400.5 12.HV Sales 30.0 25.0 55.0 13.Total Sales 1282.0 159.2 14.3 1455.5 14.Generation req'd 1497.7 186.0 16.7 1700.4 15.Peak Loads (in MW) 282.6 31.7 4.2 1999 - 2000 16.Est. LV/MV use 995.8 679.7 1675.5 102.4 85.9 188.3 16.0 5.0 21.0 1884.8 17.HV Sales 45.0 30.0 75.0 18.Total Sales 1720.5 218.3 21.0 1959.8 19.Generation req'd 2010.0 255.0 24.5 2289.5 20.Peak Loads (in MW) 379.3 43.4 6.2 2004 - 2005 21.Est. LV/MV use 1332.6 909.6 2242.2 143.6 120.4 264.0 23.5 7.3 30.8 2537.0 22.HV Sales 60.0 40.0 100.0 23.Total Sales 2302.2 304.0 30.8 2637.0 24.Generation req'd 2689.5 355.1 36.0 3080.6 25.Peak Loads (in MW) 507.5 60.5 9.1 EXISTING FACILITIES 1. HYDRO PLANTS Plant EDEA Song-Loulou Laado River Basin Sanaga Sanaga Benou6 Drainage area km2 131,400 129,800 31,000 Average natural flow n/8 2,100 2,070 221 Reservoir Data Full Supply Level (FSL) m 33 146 216 Low Supply Level (LSL) m 33 144 206 Live Storage m0 x 106 - 5 4,600 Plant Data Tailwater Level (TWL) m 7 104 190 Average net head m 26 36.5-41.5 20 Total installed capacity MW 263.2 387.6 72 Turbine discharge capacity n3/s 1,309 1,040 420 Number of units 14 8 4 Type I, II Propellers III Kaplan Francis Kaplan Commissioning 2 x 11 - 1951 (I) 4 - 1981 1982 1 x 11 - 1955 (I) 4 - 1988 6 x 20.8 - 1958 (II) 5 x 20.8 - 1974 (III) Output Peak at FSL MW 262 384 72 Peak at LSL MW 262 356 40 Primary Energy GWh 1,050 1,680 190 Average Energy GWh 1,740 350 EXISTING FACILITIES 2. RESERVOIRS Dam Mbakaou Bamendlin Map& River Basin Djerem Noun Mbam Drainage area km 20,400 2,190 3,760 Average natural flow m/s 435 48 92 Reservoir Data Full Supply Level (FSL) m 715.5 Low Supply Level (LSL) m 700 Live Storage m3 x 10' 2,600 1,800 3,200 Live Storage as percent of average flow (%) 19 119 110 3. DIESEL PLANTS (in kW installed June 30, 1991) Intercon Isolated Total DRCSE (Yaound6) 13,550 5,302 18,852 DRLO (Douala) 26,487 800 27,287 DRNEA (Garoua) 20,526 7,616 28,142 DRSO 2,478 433 2,911 DRNO - - 0 63,041 14,151 77,192 RË5EAU 1NTERCONNECTË 225, 90, 30 KV 1SSU OU GRPH � � д�'tl• .в� �А� � �д No1a : Ligne 90 kv EDEA-KR1B1 eкploitëe � у"���`� � octueHement еп ЗО Kv �� ,тb -� �К `�лво DЬtai1 des Paptsi 225 et 90 kv де �OUALA � Р 1 LOGBABA ид� ti��1�, ? г �,,� �ав г 2 ВА55А алм=_��са Иддp 3 KOUMASSI 4 DE1D0 '��а'O`�o�3air 5 BONABERI MAM••F��E ���гМВли б CIMENCAM .��р� � аа'оп мво�о 8а!спап Foumoor �$�нА"G BAfOUSSAM геп�г Fока,ё Вапд�оиг Sапгсr о� ваг^ '��о Вап ог, BANGANGтE да�а Вazо� Чкр"GSймвл т°nga :�� Мапр BAF!А �+^' Nд�kигтею NANGA ЕВОКС KUMBA ' Вокпо Mbar�ga vqgдy,g. Jmcessa 1сл Икоге^с Иооп q а МDапоlсск Миуика �` м0 ArEIE 8иЕ ВЕ о SONG �OULOU И9�� Ора1а С LUCAM О � Т�ко 'г' Еиодои!а �� ' .д� �п Ngog gлг Makak . г_ ' NGOM А Ма NpJOKNKONG NGO в:__ `�,р и Роита ОУОМА • BRGM А'"� �юS ti� „ � - '� / DrlaпguE �п� MFOU AKONOUNGA , . . � " �' . _ - - . � ESEKA М В�кок _ � .в ,_А АКопо PALMAVO � - ✓" , � � ' . . - ' --� 2oгtCks ' ' ' - - - Мютеkа'а '�}. " ' _:, и�!�а� � EBOIOWA M�ng . SANGMEUMA - - � йkот 1! •_ - . �• . . • w '� . , , �_ __ . _; LEGENDE • - ., � О Сваtгоlв frydrouHOw вл ввгvкв � lгрм 2YS kv вывгепгв ' �� ' ', О Рови У$5/90 kv м sввии � lгрм 00 Yv ввиюпи � • � �Q Ревм 9рг15/ЗО kv вn sвгvкв v' 4gм ЗО kv _ .� . � ►евгв JОПS kv м вввьпв ��� lipaв 70 kv ап ceun дв conn � �г�..:. - • ►ого4rЧ вlвrt.iКЧв о lосоlивв м геил д'i!кмhвонеn , �ff' • ' . . ;'�, 61 i -_ г `� � _� _ .. + . �� � ( Rвгеви ди Nord . �i ( � 1 � �- --� I i 1 1 ( ОwtиОв 9иiог м м.и'.n. L - - - ( �nnv � нw 1 _'- -� � иоЧ � � ,� ООи - {� (f I - I � г го..• г оо.ч { f1вrOU9sвr , �в•• � (] � I - - гпгlомvв I � ( � � � � �,. � � ,,.. г� 11 �--- 1 � jj]� ' иsониsвиs• ) U I { (г1 }1 (�1 г (О иыв � {1 I f . O Гiriri t;t�> � � - � � --� i . _ _J ! . � -�-� ( о,нои•т овпии. i �.no n 1 ' � т f мw т(•мw ���~v� L . �J L r _- - _ -" "� � _ � _ '_ ` _ "'- _ ""�' � _.. � � _ _ _ ^ � '_ - - - -- - ! г а - lгипЕ Е ORO � г �Е1 иv. � 1 � ! г Г � . _ _м_ _ ___� � ; _ __ _ ; ► Il. J ; мм <"Е • тге.. ! 1 Ci Еи[мг ' � � � � 1 1 Еоае.в• М•ноомвЕ > »нvм � � 7 �Омывир� � � . г �? г ' � � � � м.. . �г� I l- --� I� i г�� , I Еюиве[Аг ( � г. aorv• _`_J L. - �.>_-� L � ._ CEl САМ I .__ ! -. .... ,. � ^_-- ( I __ _ -. (_ _.-_ _ I ыр.. t еwлм � �) � - ( tuuw ` т ти � вСисви -� - � � � _ f � I .� f Е>ог.� i �--- . . . . � --- - �. _� Ее0� `--- У - � I i ��.. г � г0 �в. тть.. , ( 4 � I � � I.1 ( г �I + ( + иlюСи на(Nго . дTТΡдTд I ЧOUtnvt) _ 1 . _ _ � У I ( тиvв V• Y4 УΡ+ (1 ц1 • 7b LF100 � � 15•в ■ОUивlSt УОг• УОг. � . - - - - _' • � � ( � V U ) г т �ОМrв 4.?9УУв i � � ! У� � СЕи1РвlЕ MOP1Uu W-- 1 Г^tв�Ед 'rf`1 � w0 oвOltw [7;•+ 8� 001• lnг.fг[ ив(.оив(г � ( 7f У о'Erecrпicire ои свиЕвоии I � � ..в�Е�,� � .но:<е � SiE-i0 -_.__. _._- .__.-._ L- - - - _..! 1 _ . _- _ . _._1.. . _ - - --_� �-. _ -- - ._ •-1 овмие � - О(ЧЕ[Т�Ои nгs г tuoES о:иЕw►геf ЕОlв г ООЧо lOUEOU ������ l:EM/AAII lв93• ЕоЕв � ЕОЕв 1 --'--'-'- St нf Ya ин�гцв(�l ввМ.�•г р]в0иvв ] цтиыв •lвDУУА в-3Еfиыв •вwлп iивw•. воаЕЕ s•аа• ;,;о,,,; ' Ri�eeu де ргодисlгоп Е ! lОиьв г.�о. ___ . дг lгвпгроЕl д'iпtг�(г o.n �( �ыn. гiвvг � ANNEX 7.1 R�SEAU 1NTERCONNECTE 110, 90 ЕТ 30 KV 1SSU DE LACa00 Waza KArAwa KOlofefa МердАтА Оои1о Kourgw МАтА Guпv�o�9 TOKOMBERE макаiьпgау KOZA 0''оое' маgа Dpnpiya MOKOLO MER1 G�ьng�er Roumzou тсh кодеи Qво Мород@ 2атау моикопр OUA Уо1дАо О Оьоиlgои Darpaia ROUMSIKI Gazawa Мамgу Коге Se1ak Moulvoutlay мiиoiF rАвоил воиаw4н о �аг Ke�fou � Moutouroua Lara тспе�� �� виоiвиs • ооикои�а Oourteye Орипгои мдrо ои�о в GUIDER аьgа коьпа FKiU1L О Gascnьga Рыоа GAROUA • i.Евеи�е � 9ьbеть Atloumn О Centrale Нудгаи�ьqие ввв Lьgne t t0 kV eкьstante LAGDO � �в ��9пе 90 кv екьstапге - Lьgпе ЗО kV eкьstante ��� Lьgne 30 кV еп cours де construcuoп О PoSte 90г30 kV екцгапt 1� �� J д � �ocaыes eiectnьees еУ Воида р �осаьые5 еп cours • деiесtппсааоп � �Ь7 �[ С 1 С г � � r� � • � Tcnolбr2 Еспепе � г � 500 (ЮО 63 FIGURE 7-4-2 DE PRODUCTION ET DE TRANSPORT DU NORD HORIZON !98ý'.-F7 - NIVEAU DE CHARGE: 25 MAROUA T 20 MVA GUIDER 10 MVA -T (110 KV) 90KV GAROUA 110KV 110KV 2x2OMVA 2x2OmvA CENTRALE DE LAGDO 4xl8 MW ic i CENTRALE THERMIQUE DE DJAMBOUTOU 19 MW LCT~ CARTE GåNÉRALE Annex 8.1 DES RESSOURCES HYDROÉLECTRIQUES VILES . YAOUNDE * Chtrs-koux de Province o Autre iles Lfnedes imnes ~alluesos del wwvntaire > Au-desswad81000m - D000 1000m Au-dessous de 500m AMPNAGEMENM EXISTANUS A.,.pe ensdoelcuses 00m Wla .3 Ä "i S1qupementsydraleanques (ex SM LOMWU Ouvrqesd roouronnl lex. ~4ENOJIN) POSSIBIUTStS WAMIEMAGRAENTSES t=cu.pe~et hyd~oltquos > 500 GWhian - 1000 (La surface graphiclue 403 0 est proporbjonnelwe au produchble) Équ.pements hydroélectnques < 500 GWhian Roy ¾ De 100 4 500 d Deso0aå100 • Petits equpemeflts urtasns 4 Ouvrages de réguansat.on 4ko 055 17 .53 5M2 11s5 m7m N0 Y éin ifku JI10 ..-A-- - - ---- .is N I 32~ TAMU 4 SHIRM' INVFOTMRY RESULTS 1. POWER SITES Site River Instal led Average Capacity AnnuaI Costs wid 1982 Output jotal Per (U PARTMON h FFAxIO lS x10 US$x]o Nachtigal AMnt Sanaga 160 1060 51.5 171 162 DU PO1ENTEL HYDROÉLECTRIQUE Kikot Aval Sanaga 630 3100 158 170 ÉCONOMIDUEMENT ÉOUIPABLE Petit Bdeng Sanaga 345 1660 l0n 343 207 K G tG--B Grand aweng Sanaga 995 4780 275 l6 192 lSengué Sanaga 1060 5070 217 /'3 142 Nou Wouri Noun 1200 5080 3(X) H KR) 197 usoNjock Nyong 240 950 62 AX6 217 Mru~la Mogué Nyong 480 2160 107 356 165 M 2. RESERV0IRS 1.6. a Daite River Live Storage Constructii Costs mid-1982 masseotal Per 10 , nM xl0 FCFAx10 'S$x1o US$x10 .•te d'Flépliant Djeren 7700 51.0 l53 19.9 Lan-Pangar Ian 5800 35.2 l(> 18.3 *aMapé bam 3200 22.9 (8 21.2 dej~j z REs# m Minnlm ama • X ANNEX 9 CAMEROON: Public Sector Power Tariff as of 4 Sept. 1989 I - CLIENTS BASSE TENSION Les tarifs ci-après s'appliquent uniformément sur toute l'étendue du Cameroun. ') - ECLAIRAGE: - Puissance souscrite inférieure ou égale à 0,66 KVA 53,00 F/KWh - Puissance souscrite supérieure à 0,66 KVA . .. 63,00 F/KWh 2") - USAGES DOMESTIQUES Alimentation des appareils de climatisation, chauffe-eau, cuisi- nières électriques et machine à laver, pour autant que l'énergie consommée est enregistrée par un compteur spécial - 47,00 F/KWh 3') - FORCE MOTRICE - Tous usages 47,00 F/KWh 4') - ECLAIRAGE PUBLIC - Tarif consenti pour autant que les consommations s'étendent de 18 hà06 h 00 . 32,00 F/KW I - CLIENTS MOYENNE TENSION Le tarif ci-dessus s'applique uniformément sur toute l'étendue du Cameron. Il se compose de deux termes qui s'ajoutent: 1') - PRM FIXE : 7 900 FCFA par KW de puissance souscrite. 20) - TAXE PROPORTIONNELLE PAR KWh CONSOMME Par tranche d'heure d'utilisation mensuelle de la puissance souscrite : - In tranche :de 0 à 200 h 35,00F - 2·tranche :de 201 à 325 h 32,00F - 3e tranche :de 326à 450 h 29,00F - 4* tranche : au-delà de 450h 27,00 F I - CLIENTS HAUTE TENSION - 90 KV Le tarif est composé de deux termes qui s'ajoutent: le) - PRIME FIXE PAR KW DE PUISSANCE SOUSCRITE Elle est fonction du nombre d'heures d'utilisation annuelle de la puissance soq;scrite : - de 0 à 900 h : 13 517 F/KW - de 3 901 à 5 400 h : 9 412 F/KW - de 5 401 à 6 600 h : 4 707 F/KW -au-delà de 6 600 h : Néant. 2-) - TAXE PROPORTIONNELLE PAR KWh CONSOMME Elle est fonction du nombre d'heures d'utilisation mensuelle de la puissance souscrite : - d 0 à 200h : 23.53 F/KWh - de 201 à 325 h: 21,18 F/KWh - de 326 à 450 h: 16,47 F/KWh - au-delà de ~450 h : 11,95 F/KWh. Tariffs for special High Voltage custoMers ALUCAM FCFA 600 Million/month plus FCFA 4.31/kWh CICAM FCFA 7900/kW-month subscribed plus FCFA 24.00/kWh