Niger - Energy Project

Document of The World Bank FOR OFFICIAL USE ONLY C4 I4|~ -t t Report No. 6746-NIR STAFF APPRAISAL REPORT REPUBLIC OF NIGER ENERGY PROJECT January 8, 1988 Africa Region Sahelian Department Industry and Energy Operations Division This document hs a eticted ditrbuto and may be used by recpien- only in the petormuce of their officid dutes its conts may not othewise be dickosed w Wodd Bank autborLastion  CURRENCY EQUIVALENTS Currency Unit CFA Franc (CFAF) US$1 CFAF 329 WEIGHT AND MEASURES One Kilovolt (kV) 1,000 volts One Megawatt (MW) - 1,000 kilowatts (kW) One Gigawatt hour (GWh) 1 million kilowatt hours (kWh) One barrel (bbl) - 0.16 cubic meters One ton of oil equivalent (t.o.e.) - about 7 bbl of crude oil 1 meter (m) - 3.28 feet 1 kilometer G 0.62 miles 1 kilogramme (kg) - 2.205 pounds 1 ton (t) 2,205 pounds 1 hectare (ha) - 2.47 acres ABBREVIATIONS AND ACRONYMS AFN - Association des Femmes du Niger BDRN - Banque de D4veloppement de la Republique du Niger BIAO - Banque Internationale de l'Afrique de l'Ouest CCCE - Caisse Centrale de Cooperation Economique CIFED - Comite Interministeriel pour la Promotion des Foyers Ameilior8s et des Energies Domestiques DANIDA - Danish International Development Agency DE - Direction d'Energie DFF - Direction des For^ets et de la Faune EIB - European Investment Bank FAC - Fonds d'Aide et de Cooperation (France) IDB - Islamic Development Bank KfW - Kreditanstalt fUr Wiederaufbau LPG - Liquified Petroleum Gas (propane and butane) MAE - Ministare de l'Agriculture et de l'Environnement MME - Ministare des Mines et de l'Energie MSE - Ministry of State Enterprises NEPA - National Electric Power Authority (Nigeria) NIGELEC - Socigte Nigerienne d'Electricite ONERSOL - Office National de l'Energie Solaire SONICHAR - Societe Nig6rienne des Charbons d'Anou-Araren SONIDEP - Societg Nigerienne des Produits PEtroliers USAID - US Agency for International Development FISCAL YEAR Government . October 1 - Sentember 30 NIGELEC : January 1 - December 31  FOR OMCIAL USE ONLY NIGER ENERGY PROJECT STAIF APPRAISAL REPORT TABLE OF CONTENTS Page DOCUMENTS CONTAINED IN THE PROJECT FILL .................... i CREDIT AND PROJECT SUMMARY .................. iv I. THE ENERGY SECTOR A. Energy Resources and Consumption 1 B. Energy Sector Organization ......................... 1 (i) Household Energy I (ii) Electric Power 2 (iii) Petroleum ...................... ........... 3 (iv) Other Renewable Energy 3 C. Energy Sector Development, Policies and Plans ...... 3 (a) Household Energy Subsector 4 (i) Firewood Consumption, Prices and Supply 4 (ii) Demand Management ......................... 5 (iii) Firewood Supply Management ................ 6 (iv) Government Strategy ....................... 7 (b) Electric Power Subsector ....................... 8 (i) Existing Electricity Supply Facilities .... 8 (ii) Electricity Imports ....................... 9 (iii) Access to Electricity Service ............. 9 (iv) Trends in Consumption ...............00.... 9 (v) Sector Development and Investment Program 9 (c) Petroleum Subsector ........................... 11 (i) Petroleum Consumption 11 (ii) Petroleum Procurement and Distribution 11 (iii) Petroleum Pricing Structure 11 (iv) Petroleum Storage ..................... 12 (v) Petroleum Potenti6l. ................,....... 12 (vi) Government Strategy 13 (vii) Other Renewable Energy ..... 13 This report is based on the findings of an ID! appraisal mission that visited Niger in January 1987, comprising Messrs. I. Menezes (Senior Economist), S. Mikhail (Power Engineer), T. Storm van Leeuwen (Financial Analyst), M. Wilton (Senior Econoiist), W. Floor (Energy Planner), J. Gorse (Sr. Forestry Specialist), T. O'Connor (Geologist), J. Bond (Economist), J.P. Dupuy (Lawyer), G. Madon and J. Thomson (Consultants). Mr. P. Nignon of %he Resident Mission and Ms. M. Chung Kong also assisted with the appraisal report. This document has a restricted dibution and may be used by recipients only in the performance of theif o&ial duties Its contents may not otherwise be discosed without World Bank authorization.  Page D. NIGELEC - The Power Utility *......... ............. 13 (a) Organization and Management ............ ........ 13 (b) Manpower and Training ......... ................. 14 E. NIGELEC's Finances ........... . .. . . .. . .. . .. . .. . .... . 14 (a) Accounting and Audit ........................... 14 (b) Past Financial Performance and Present Position . 15 (c) Billing and Collection ......................... 16 (d) Tariffs .......... ....................................... 17 (e) Finar.cial Objectives ........................... 17 (f) NIGELEC's Financing Plan *...................... 18 (g) Future Finances ... .......................... . 19 F. SONICHAR ........................... 20 G. Bank Group Role in the Energy Sector ...*............ 22 (a) History of Involvement ......................... 22 (b) Rationale for Involvement ...................... 22 II. THE PROJECT A. Project Objectives ...... ....... ...... ....... 23 B. Project Description .*** .. .... * ......... 23 C. Project Cost ....i.................................. 25 D. Project Financing ...............................25 E. Project Implementation and Monitoring ............. 26 F. Project Justification, Benefits and Risks ......... 31 III. AGREEMENTS REACHED AND RECOMMENDATION ................. 33  LIST OF ANNEXES Page 1-1 - National Energy Balance .........35 1-2 - Energy Sector Investment Program, 1987-92 36 1-3 - Projections of Firewood Production atnd Consumption 37 1-4 - Illustration of Stoves used in Niger 38 1-5 - Cost of Various Household Fuels ....39 1-6 - Government Objectives for Household Energy 41 1-7 - Population Growth and Market Penetration Objectives . 42 1-8 - Proposed Wood Stock Management and Firewood Supply System 43 1-9 - Existing Generating Facilities 46 1-10 - Load and Generation, Historical, 1983-86 and Forecast, 1987-96 49 1-11 - Load and Capacity Balance, 1985-95 50 1-12 - Consumption of Petroleum Products, 1978-86 o,..0. 51 1-13 - Consumption of Petroleum Products by Sector ....... 52 1-14 - Prices of Petroleum Products 53 1-15 - Petroleum Storage Capacity 54 1-16 - NIGELEC - Organization Chart 55 1-17 - NIGELEC - Training Program 56 1-18 - Actual and Projected Income Statements, Funds Flow Statements and Balance Sheets (1983-93), Assumptions for Financial Projections ........... 58 1-19 - NIGELEC - Electricity Tariff Schedule 64 1-20 - Financial Objectives for the Power Sector 65 1-21 - SONICHAR 68 2-1 - Project Cost Estimates 73 2-2 - Background and Technical Details 74 2-3 - Project Financing Plan 84 2-4 - Project Implementation Schedule 85 2-5 - Estimated Credit Disbursements 86 2-6 - Economic Analysis and Fiscal Impact - Housel.old Energy Component 87 2-7 - Economic Analysis - Power Component 90 MAP: IBRD No. 20108-NIR: NIGER - Energy Resources and lnfrastructure in 1987 AF5IE January 8, 1988  - i - NIGER ENERGY PROJECT DOCUMENTS CONTAINED IN THE PROJECT FILE Reference Nos. Code Nos. 1. Etude du dEveloppement A long terme du sous-secteur 226.988(1-11) de 1'6lectricit6 au Niger, Lavalin International, - January 1986. 2. Expertise sur la ligne electrique agrienne 132 kV D03161 (Rapport Final) Anou-Araren-Akokan, Fichtner - February 1987. D03162 (Rapport Minute) 3. Ligne 66 kV, Poste Goudel, Poste Rive Droite, D02673(1-2) Rapport de Projet - February 1987. 4. Batiment NIGELEC, Estimation sommaire SEGO - D03163 December 1986. 5. Etude d6taillEe l'interconnexion a 132 kV, D03160 Katsina-est du Niger, Proposition Lavalin - March 1987. 6. SONICHAR, Draft contrat-plan, December 1986. D03164 7. NIGELEC - Compte rendu de gestion, Concessions NIGELEC YFR184 exercice 1983, 1984, 1985. '85 8. NIGELEC - Budget de fonctionnement, Concessions NIGELEC YBR187 exercice 1986, 1987. 9. Rapports d'audit NIGELEC 1984, 1985. NIGELEC YAR'84 '85 10. SONICHAR - Rapports annuel exercice 1983, 1984, 1985. SONICHAR YR'84 YFR'83-'85 11. SONICHAR - Budget de fonctionnement 1986. SONICHAR YAR'86 12. Niger - Issues and Options in the Energy Sector - A08067 May 1984, Joint UNDP/World Bank Energy Sector. Assessment Program 13. Bilan energetique du Niger 1982-84 - ONUDI - June 1985. D03166 14. Programme d'&conomie en bois de feu - September 1985, D03165 Sozietact Fuer Enwicklungs Planning (SFE)/Fonds EuropEen de DEveloppement (FED).  - ii - Reference Nos. Code Nos. 15. Household Energy, Conservation and Substitution, Bank Reports ESMAP - April 1987. Household Energy, Promoting Management of the Niamey Department Woodstock by Locals and Professionals, ESMAP (04/87) Bank Reports 16. Niger - Improved Woodstoves, ESMAP, September 1986. 17. Niger - Conservation et substitution de l'6nergie D02655 a usage domestique - July 1986. (a) Marketing Documents - No. 1 - Enqu^te consommateurs et substitution - No. 2 - Presentations a ONERSOL: Foyers a gaz et a briquettes - No. 3 - Animations des quartiers: Foyers a gaz et a briquettes - No. 4 - Animations des quartiers: Foyers a pgtrole - No. 5 - Enqu^te chefs de famille et substitution - No. 6 - Campagne Achat-pZse de bois a Niamey - No. 7 - Enquete clientele gaz - No. 8 - Analyse de la distribution et de la consommation du p6trole a Niamey - No. 9 - Enquete, Maradi-Zinder (b) LPG/kerosene Distribution Report (Skaarup) - June 1986 (c) Improved Kerosene Stoves Report - February 1987 D02653 18. Forestry Sector Study, SEMA Energie - 1985. D02569(1-5) 19. Vers une gestion des ressources forestieres par les populations locales - July 1986. 20. Applications pratiques des cartes d'inventaire des ressources fondamentales pour choisir les zones d'intervention pour les activites forestieres au Niger - March 1984. 21. Ordonnance No. 80-001 de Janvier 1986 portant regime gEn4ral des 6tablissements publics, Socift4 d'etat et societe d'Economie mixte. 22. Accord relatif A la fourniture d'energie glectrique D02657 a la Republique du Niger par la Rgpublique Federale ddu Nigeria du 8 janvier 1972.' 23. Agreement on the Development of the Interconnection between the NEPA and NIGELEC networks of June 27, 1986.  - iii - Reference Nos. Code Nos. 24. Arr^te No. 012/PCMSS/PM du 11 novembre 1986 Laws & Decrees portant creation d'un Comite interministgriel pour la promotion des foyers am6lior6s et des 6nergies domestiques (CIFED). 25. Decret No. 25/MGS du 2 decembre 1986 portant Laws & Decrees creation d'une Cellule Technique de coordination pour la promotion des foyers ameliores et les energies domestiques. 26. Arr8te No. 057/MCI/T/DCP du 14 novembre 1986 fixant Laws & De.rees le prix de vente du paz dor-stique au Niger. 27. Ordonnance No. 87-011 du 12 mars 1967 relative A Laus & Decrseu la dglivrance du permis de coupe de bois. 28. Decret No. 87-037/PCMS/MHE-037 du mars 12, 1987, Laws & Decrees portant tarification des redevances perques A l'occasion de la dllvrance du permis de coupe de bois. 29. Arr8tg No. 065/MKI/DI d'octobre 1982 portant attribution et organisation de la Direction de l'Energie. 30. Code petrolier - Textes d'application, 1978. D03572 31. Direction des Mines et de la Geologie - Rapport annuel. Yearly Reports 32. Projet p6trolier Sokor, BEICIP, 1985. 321.969 33. Petroleum Sector - Technical Assistance needs, 321.969 BEICIP, 1985. 34. Etude de factibilitE - Projet d'un dip8t D03470 d'hydrocarbures a Niamey, ONETI, 1986. 35. Sonidep - Etats financiers 1983, 1984, 1985. SONIDEP YFR'83 AF5IE January 8, 1988  - iv - NIGER ENERGY PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Niger Beneficiaries: Direction de l'Energie (DE) Direction des Forets et de la Paune (DFF) Societg Nigerienne d'Electricit& (NIGELEC) Amount: SDR 24.7 million (US$31.5 million equivalent) Onlending TerIs: The Government would relend 82% of the Credit (US$25.7 million) to NIGELEC at the prevailing Bank interest rate for 20 years including 5 years of grace. NIGELEC would bear the foreign exchange risk on that amount of the Credit. Colenders: A consortium of cofinanciers would provide about US$37.8 million equivalent toward project costs. Project The project aims to address in a comprehensive Description: manner the various and interconnected energy problems facing the economy by developing policies and progrsms to redress the growing imbalance between energy demand and supply. It is based on a strategy for the energy sector initially developed as part of the Government's Structural Adjustment Program. Specifically, the project would: (i) promote firewood conservation, substitution of energy sources and a more effective management of natural forest cover; (ii) promote the development of renewable energy technologies; (iii) promote the conservation of electric power and provide electricity at least cost; and (iv) upgrade local capabilities to administer petroleum exploration. The project comprises elements of policy reform as well as investment. Policy reforms would focus on: (i) adjusting household energy prices to encourage efficient use of energy; (ii) changing the way firewood eupply is managed, on a pilot basis, by handing over control and exploitation of woodstock to local communities; and (iii) helping implement needed institutional and organizational changes in the power sector such as providing NIGELEC with greater autonomy, along the lines recommended by studies financed by the Government and IDA. On the investment side, the project would consist of the following:  - v (i) Household Energy: (a) development of a firewood trade monitoring and taxation system, including the construction of firewood checkpoints and provision of vehicles, equipment, training and technical assistance to DFF; (b) zoring of areas around urban centers by firewood potential, preparation of firewood supply management and incentive plans, and establishment of rural firewood markets and production areas on a pilot basis; (c) promoting the local manufacture and marketing of improved woodstoves and the importation, production, and marketing of improved kerosene and LPG (gas) stoves; (d) promoting the development of renewable energy technologies, in particular in the field of solar energy. (ii) Electric Power: (a) construction of the Nigerien portion of a 300 km single circuit 132 kV trasimission line linking Nigeria's grid with Maradi and Zinder in eastern Niger and installation of A3? kV substations; (b) rehabilitation of a 132 kV transmission line between Anou-Araren and Akokan in the northern mining region of Niger; (c) rehabilitation and extension of medium and low voltage distribution facilities in Niamey, Maradi, Zinder and surrounding region; (d) studies, including provision for engineering of a hydroelectric project; and (e) provision of technical assistance, training, office space, equipment and vehicles to NIGELEC. (iii) Petroleum: (a) retrieval, reprocessing and archiving of geological and geophysical data;  - vi - (b) organization of laboratory, storage and information retrieval facilities for petroleum samples and data; (c) review of legislative and fiscal regimes; (d) preparation of a synthesis of the petroleum geology of Niger and a strategy to accelerate exploration, possibly in cooperation with neighboring Chad and Nigeria; (e) promotion of areas that are presently free or will be relinquished; (f) provision of equipment, training and technical assistance to DE. Project Benefits The main benefit of the household energy and Risks component is the protection of the fragile environment around urban areas. The rate of firewood consumption would be reduced in half, resulting in savings in firewood of about 180,000 tons a year. The increased use of kerosene and LPG stoves would reduce cooking time for housewives and make food preparation easier. The household energy strategy is new and may encounter serious social or political obstacles. Also, difficulties and abuses could be expected at all levels of the firewood regulation and management network. However, given that the alternatives are few and unpromising and the cost of deforestation high, the risks associated with the relatively small investments are well worth taking. To minimize risks, this component will be implemented on a pilot basis. The main benefits of the power component would be to provide a reliable power supply at the least cost to the eastern part of Niger and expand that supply, thus reducing the prestnt infrastructural bottlenecks to growth. The power component will also contribute to the reduction of the net energy import bill. The technical risks on this component are small, given the experience with NIGELEC in the First Power Project. There are no special risks associated with the petroleum subcomponent.  - vii - Local Foreign Total ---- (US$ Million) Cost Estimates a/ A. Household Energy (a) Consulting Experts (about 330-manmonths) studies, and training 1.0 2.0 3.0 (b) Provision of office facilities, firewood control points, equipment, material and vehicles 0.3 1.5 1.8 (c) Operational support, including travel and local personnel 3.0 1.0 4.0 (d) Renewable energy 0.1 0.5 0.6 Sub Total 4.4 5.0 9.4 B. Electric Power (a) Construction of 300 km of 132 kV transmission lin and installation of substations at 4.5 22.5 27.0 (b) Rehabilitation of 132 kV transmission line in the north of Niger 0.5 2.1 2.6 (c) Rehabilitation and extension of distribution systems in Niamey and eastern Niger 3.2 12.9 16.1 (d) Training and Technical Assistance 0.1 1.6 1.7 (e) Studies 0.2 1.9 2.1 (f) Provision of office space, equipment, and vehicles 1.1 2.9 4.0 Sub Total 9.6 43.9 53.5 a Project is exempt from taxes and duties.  - viii - Local Foreign Total