Senegal - Industrial energy conservation program

eY1IL Energy Sector Managenment Assistance Programme Senegal Industrial Energy Conservation Program Report .'o. 165/94  JOINT UNDP / WORLD BANK ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME (ESMAP) PURPOSE The Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) was launched in 1983 to complement the Energy Assessment Programme, established three years earlier. ESMAP's original purpose was to implement key recommendations of the Energy Assessment reports and ensure that proposed investments in the energy sector represented the most efficient use of scarce domestic and external resources. In 1990, an international Commission addressed ESMAP's role for the 1990s and, noting the vital role of adequate and affordable energy in economic growth, concluded that the Programme should intensify its efforts to assist developing countries to manage their energy sectors more effectively. The Commission also recommended that ESMAP concentrate on making long-term efforts in a smaller number of countries. The Commission's report was endoi ;ed at ESMAP's November 1990 Annual Meeting and prompted an extensive reorganization and reorientation of the Programme. Today, ESMAP is conducting Energy Assessments, performing nreinvestment and prefeesibility work, and providing institutional and policy advice in selected developing countries. Through these efforts, ESMAP aims to assist governments, donors, and potential investors in identifying, funding, and implementing economically and environmentally sound energy strategies. GOVERiVANCE AND OPERATIONS ESMAP is governed by a Consultative Group (ESMAP CG), composed of representatives of the UNDP and World Bank, the govermnents and institutions providing financial support, and representatives of the recipients of ESMAP's assistance. The ESMAP CG is chaired by the World Bank's Vice President, Finance and Private Sector Development, and advised by a Technical Advisory Group (TAG) of independent energy experts that reviews the Programme's strategic agenda, its work program, and other issues. ESMAP is staffed by a cadre of engineers, energy planners and economists from the Industry and Energy Department of the World Bank. The Director of this Department is also the Manager of ESMAP, responsible for administering the Programme. FUNDING ESMAP is a cooperative effort supported by the World Bank, UNDP and other United Nations agencies, the European Community, Organization of American States (OAS), Latin American Energy Organi.ation (OLADE), and countries including Australia, Belgium, Canada, Denmark, Germany, Finland, France, Iceland, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Sweden, Switzerland, the United Kingdom, and the United States. FURTHER INFORMATION For further information or copies of completed ESMAP reports, contact: ESMAP c/o Industry and Energy Department The World Bank 1818 H Street N.W. Washington, D.C. 20433 U.S.A.  SENEGAL INDUSTRIAL ENERGY CONSERVATION PROGRAM May 1994 Power Development, Efficiency and Household Fuels Division Industry and Energy Department The World Bank 1818 H Street N.W. Washington, D.C. 20433 This document has restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without UNDP or World Bank authorization.  ACRONYMS BEE Bureau des Economies d'Energie CIDA Canadian International Development Agency DEMG Direction de l'Energie, des Mines et de la Geologie ESMAP Energy Sector Management Assistance Programme IPF Indicative Planning Figures MICA Ministbre du Commerce, de l'Industrie et de l'Artisanat PEEI Programme d'Economies d'Enengie dans l'Industrie UNDP United Nations Development Programme ABBREVIATIONS kWh Kilowatt hour MWh Megawatt hour TOE Ton of oil equivalent CONVERSION FACTORS 1 TOE = 11,622 kWh 1 Ton fuel oil 1500 = 0.97 TOE I Ton fuel oil 3500 = 0.96 TOE I Ton Diesel Oil/Gazoil = 1.02 TOE 1 Ton butane gas = 1.09 TOE I Ton bagasse = 0.425 TOE 1 Ton peanut hull = 0.4 TOE 1 Ton gasoline super/regular = 1.1 TOE 1 Ton hexane = 1.155 TOE EXCHANGE RATE 1 US dollar = 250 CFAF FISCAL YEAR January 1 - December 31  TABLE OF CONTENTS page FOREWORD SUMMARY AND CONCLUSIONS ..........................................................i L THE INDUSTRY AND ENERGY SECTORS IN SENEGAL .I An Economy in Adjustment .1 The Industry and Energy Sectors in Senegal .1 The Industrial Sector .1 The Situation at the Time of the Introduction of the PEEI 3 The Cost of Production Factors .3 Poor International Competitiveness. 4 Low Industrial Capacity Utilization .S The Energy Sector .S General Context .5 The Macroeconomic Framework and the Energy Sector 5 Natural Resource Endowment .6 The Efficiency of Energy Systems .7 Energy Policy Objectives and Instruments. 7 Pricing Policy .8 Energy Sector Objectives .8 IL THE CONFIGURATION OF THE PEEI.10 Energy Management in Senegal .10 The Recommendations of the 1984 Energy Audit .10 Structure of the PEE .10 The General Configuration of the PEE .10 Program Participants .11 The First Stage of the Works: Preparation of the Progm. .12 Objectives and Content .12 1esults .12 The Later Stages of the Works: Energy Audits and Training .13 Objectives. 13 Interrelationship of Activities .13 Intervention Procedures .13 Energy Audits .13 Training Actions .14  El THE RESULTS OF TIE ENERGY CONSERVATION PROGRAM ....... 16 Evaluation of the Program .................................................... 16 Principal Objectives ........................ ............................ 16 A Questionnaire as the Main Tool of the Survey ......................... 16 An Entirely Satisfactory Response Rate ....................................... 17 A Balanced and Representative Sample ....................................... 17 The ftlribution of the PEEI to Energy Conservation ......................... 19 . Well Received Program ............... ............................ 19 Financing of the Audits by the Companies: Still Some Way to Go ........................................... 19 The Audit Estimates Were Generally Regarded as Reliable .......... 20 Potential Savings: 15 Percent of Total Consnmption .................. 20 Execution Rate ........................................... 20 The Profile of the Projects Selected ........................................... 21 Systematic Recourse to Self-financing ........................................ 23 Benefits of the Program ........................................... 23 Implementation Conditions of the Measures: The Structure of the Projects .24 General Characteristics of the Measures .26 Execution of the Investments .27 Importance of the Payback Period in the Decision to Go Ahead. 28 The Impact of Unit Costs on Company Decisions ....................... 29 Behavior Varying by Company .................................................. 33 The Impact of Energy on the Company ...................................... 33 The Problem of Plant Residues ................................................... 34 The Question of the Average Cost of Projects ............... .............. 34 Projects Postponed for Lack of Financing? ................................. 35 Projects Abandoned Because of Technical Uncertainties ............. 36 IV. LESSONS DRAWN FROM THE PROGRAM .............................. .......... 37 The Need for a Catalyst .................................................... 37 Obstacles to the Identification of Measures .......................................... 37 The Organization of Demonstration Programns ..................................... 38 Obstacles to Implementation of the Measures ....................................... 42 Decision Criteria .................................................... 42 Subsidized Rates to Take Account of Externalities? ............................. 43 Reducing Uncertainty and Risks by Demonstrating Techniques ........... 44 Reducing Uncertainty through Transparency in Inter-company Relations .................................................... 44 Improving the Economic Environment ................................................ 45  V. TOWARDS FUTURE ENERGY CONSERVATION PROGRAMS IN SENEGAL .................................................... 46 A Potential Largely Realized in Industry .............................................. 46 Some Potential in the Residential, Commercial and Institutional Sectors .................................................... 46 Household Fuels .................................................... 47 ANNEXES I List of the Technical Reports Prepared During the PEEI ............................... 38 2 Senegal Energy Balance in 1988 .................................................... 49 3 Prices of Petroleum Products .................................................... 50 4 Electricity Tariffs .................................................... 53 5 Questionnaire .................................................... 56 6 Recommended Measures .................................................... 68 7 Structure of the Savings Potential .................................................... 69 TABLES 1 Branches of Activity of Energy Consumnption of Firms Audited .................... iii 2 Savings Potential Identified and Implemented ............................................... iv 1.1 Some General Data on Senegal .....................................................1 1.2 The Modern Industrial Sector in Senegal in 1986 ......................................... 2 3.1 Characteristics of the Execution of the Recommendations ............................. 21 3.2 Payback Period for the Recommended Measures .......................................... 23 3.3 Profile of Measures Recommended .................................................... 25 3.4 Project Status According o Payback Period .................................................. 28 3.5 Savings Achieved Following the Projects .................................................... 28 3.6 Impact of the Energy-intensive Companies ................................................... 33 3.7 Project Costs in Energy-intensive Companies ................................................ 34 4.1 Effectiveness of PEEI Intervention .................................................... 40 FIGURES 3.1 Consumption by Type of Energy .............................. ...................... 18 3.2 Characteristics of the Execution of the Recommendations ............................. 22 3.3 Potential Identified by Type of Energy .......................... 27 3.4 Impact of the Unit Cost of the Projects (Percentage of Total Cost) .......... ...... 30 3.5 Impact of the Unit Cost of the Projects (Percentage of Total Savings) ........... 31 4.1 Program Effectiveness According to the Size of the Firm .............................. 41  FOREWORD This is the final report on all activities undertaken by ESMAP in Senegal in industrial energy conservation since January 1986. These activities, under the general heading "T,.dustrial Energy Conservation Program (Programme d'Economies d'Energie dans l'Industrie; PEEI)" have involved helping Senegalese institutions and firms in the industrial sector to identify and implement energy conservation measures. ESMAP implemented the PEEI in three phases, with financing from UNDP (from TPF resources) and Canada (through CIDA). The main features of these phases can be summarized as follows: Financing Phase Period Source Amount 1. Definition and preparation of the PEEI 1986 UNDP US$ 479,000 2. Energy audits of 10 industrial firms 1986-87 CIDA Can$ 1,100,000 3. Continuation of the audit progiam (37 additional audits) and support services to institutions and firms in the industrial sector 1988-91 CIDA Can$ 3,987,720 In Phase I of the PEEI, ESMAP was the executing agency o. behalf of UNDP, for the implementation of technical assistance. In Phases 2 and 3, financed by CIDA, the World Bank managed the trust funds made available to Senegal by Canada as part of the First Project for the Rehabilitation of the Energy Sector (Credit SE-1710), and ESMAP acted as supervisor of PEEI activities under arrangements agreed between Senegal, Canada, and the World Bank. A series of reports was prepared as part of the PEEl. The following table summarizes the type and status of these reports (including this one).  Phases Reports Author(s) Dates 1 (UNDP project) 1. Consultants' reports Consultants, 1986 2. Completion report (Phase 1) nroject leader 1986 (consultant) 2&3 3. Energy audits Consultant 1987- 1990 2&3 4. Various Reports Consultant 1987- 1990 2 5. Completion report (Phase 2) ESMAP 1989 1,2 & 3 6. Final report for the entire progtim ESMAP 1992 This docnument constitutes both the final report on ESMAP activities and the report to be submitted to CIDA at the conclusion of the agreements made between that agency and the World Bank. This report is organized as follows, by section: I. The Industry and Energy Sectors in Senegal. II. The Configuration of the PEEI (objectives, activities, and resources). m. The Overall Results of the PEEI. IV. The Lessons to be Drawn from this Program. V. Recommendations on Further Energy Conservation Activities to be Undertaken both by Senegal and ESMAP.  SUMMARY AND CONCLJUSIONS The Results of the PEEI 1. The implementation of the P13El resulted in energy savings representing 4.6 percent of the consumption of the firms audited, or more than 3 percent of the total consumption of the industrial sector. In financial terms, the annual savings made by the firms was about CFAF 1,927 million (US$ 7.7 million), on an investment of CFAF 2,426 million (US$ 9.7 million), giving an internal rate of return of 77 percent. In economic terms, including the cost of the PEEI and taking into account the smaller gains that resulted from incorporating only the economic cost of commercial energy, the internal rate of return was about 23 percent. 2. The audited sample consisted of the 47 largest energy-consuming firrms; although they represented only 10 percent of firms in the industrial sector, they accounted for more than 1/0 percent of the sector's energy consumption. The total potential savings identified were 24,380 TOE, or slightly less than 15 percent of total initial consumption. The investments made by the evaluation date represent about one-third of the potential savings, whereas those that the firms expect to make in the years ahead represent 42 percent of this initial potential. 3. The industrial firms selected priority measures for which (a) the payback period was less than two years (giving rise to an "implicit discount rate" of about 40 percent); and (b) the unit cost was relatively small. Implementation of almost all the measures was self-financed. It is essentially risk (technical or relating to the uncertainties of the economic situation) that determines whether projects are postponed or abandoned. Financing did not appear to be a major constraint except in the case of medium-cost measures for which the transaction costs are quite high. 4. The potential savings identified, 15 percent of total consumption, are at the lower end of the estimates normally made for developing countries (15 to 30 percent). Energy in Senegal is expensive: the average tariff for electricity is approximately 20 percent higher than its economic cost, and the prices of oil products, which are heavily taxed, are at least 100 percent higher than their economic costs. The tariff signals sent to industrial consumers thus definitely encourage investments in enhancing energy efficiency. It appears, however, that despite these high prices, "optimal" efficiency, in the prevailing economic conditions is not being achieved. To some extent, the protection enjoyed by a certain number of firms has enabled them to pass on the extra costs attributable to their inefficiency, but the fact that a significant proportion of the energy-saving measures identified were implemented shows that the information factor itself is an important element in the decision making process. This indicates both the influence and limits of the price effect and that a significant residual  -ii - potential can still be mobilized by reducing the information and expertise gap among the principal players through programs such as the PEEI. 5. It is not necessary to wait for implementation of the projects held over to regard the PEEI as a profitable investment, not only because of its direct results (see para. 1), but also because of the long-term impact of sensitization of the Senegalese industrial sector to energy conservation. However, a second objective was the establishment of mechanisms guaranteeing the sustainability of the energy savings made in the sector; this involved a study of the most appropriate institutional mechanisms and var nus training activities .argeted at (a) government employees; (b) technical managers in the firms; and (c) local energy services companies. 6. However, energy conservation has never become a priority of the Senegalese public authorities, although support and motivation of the government are prerequisites for this kind of program to be fully successful and sustainable. The Energy Conservation Bureau (Bureau des Economies d'Energie; BEE), despite its active participation, was never fully able to perform its mission (i.e., to inform, to design incentive mechanisms for energy conservation, to review, and to supervise the program). BEE's mixed achievement mainly roots in insufficient resources, unprecise missions, unclear institutional relationship with industries and, more generally, in the inherently different priorities set by government agents and industrial operators. 7. Although it was possible to train potential energy savings auditors. the prospects for the development of a spontaneous supply and demand for local energy services remains liniited. Viability of energy service companies remains uncertain, because of the small market. Focus on a limited range of services in such "universal" areas as industrial electrotechnics and thermal engineering looks more promising. Moreover, such services could be performed as complementary activities by firms specialized in systems maintenance or equipment supply. Prospect for extending the market for energy services to the regional dimension should be investigated, and cross-fertilization, through the dissemination of successful experiences (energy efficiency in buildings in C8te d'Ivoire, for example), should be encouraged. Execution of the PEEI Context of the Activity 8. Since 1981, Senegal's energy policy objectives have placed special emphasis on reducing the country's exteinal dependence on oil imports and easing the pressure on the environment. The reforms undertaken to this end involved oil products and electricity and were based on raising the taxes on and prices of these forns of energy, which now greatly exceed their economic costs. 9. Senegal's industrial sector, which is 3ngaged in restructuring deriving from the New Industrial Policy implemented since. 1986, has been penalized by the high cost of production  - iii - factors, particularly the cost of energy. In order both to improve Senegal's energy efficiency and increase the internal and external competitiveness of its industrial firms, the government decided that the price measures should be complemented by programs to help industrial companies identify and execute measures to save energy. It was in this context that the PEEI was devised and implemented. Institutional Recommendations 10. Analysis of the most appropriate institutional framework for implementing the PEEl led to recommendations to amnend the statutes and strengthen the human and material resources of the Energy Conservation Bureau. These recommendations were not fully implemented, however. Audits and Training Activities 11. The results of the PEEI were evaluated in 1991 two to three years on average after the audits and training activities were completed. The principal evaluation tool was a detailed questionnaire sent to the 47 firms concerned and systematically completed during interviews with their technical managers and directors. Analysis of the questionnaire enables certain lessons to be drawl regarding the mechanisms for enhancing energy efficiency. 12. The Key Figures. The sample of firms audited represents more than 10 percent of the formal industrial sector firms in Senegal but more than 70 percent of the sector's energy consumption; it covers the various branches of activity very adequately (see table 1). TABLE 1: Branches of Activity of Energy Consumption of Firms Audited Branch No. of Firms Energy Consumption (TOE) Fisheries 7 12,282 Agri-food 14 114,700 Textiles 6 3,844 Construction/Metalworking 4 709 Chemicals 5 3,444 Paper 4 446 Mines 2 42,916 Others 5 1,492 TOTAL 47 179,833  - iv - 13. The various components of the PEEI are perceived positively by the firms: the audit and complementary studies components, dealing concretely with subjects directly linked to company activities, were unanimously welcomed, although assessments varied of the benefits of the seminars and the general information presentations. The measures recommended and the estimates of their benefits and costs are regarded as realistic, a notable achievement in light of the regular propensity of specialized firms to exaggerate the potential return on recommendations of this kind. 14. The audits revealed a savings potential (24,400 TOE) representing some 15 percent of the initial consumption of the firms; across-the-board implementation of these measures would require an investment of CFAF 3,110 million (US$ 52 million); see table 2. TABLE 2: Savings Potential Identified and Implemented Savings Activity Audit Category Identified Implemented No. of projects 245 112 Investment (CFAF million) 13,110 2,426 Expected gains (CFAF million) 5,380 1,927 Electricity 745 485 Oil products 8,868 2,180 Plant residues 14,767 5,050 Total Energy Savings in TOE 24,380 7,715 1'5. The measures implemented at the time of the evaluation represent one-third of the potential savings (or almost 5 percent of the total initial consumption of the sample and more than 3.5 percent of industrial sector consumption) for less than 20 percent of the total cost of the recommended projects (CFAF 2,426 million, or US$ 9.5 million). The selection, by the managers of the firms, was made according to two basic criteria: the payback period and unit cost. The projects implemented had an average payback period of 1.3 years, compared with 2.4 years for the entire range of recommended projects. Their average cost was some CFAF 22 million (US$ 85,000) compared with CFAF 54 million (US$ 200,000) for the recommended measures as a whole.  -v - 16. Nearly all of the projects implemented (108 of 112) were self-financed, which explains why the low-unit cost projects were selected. According to the managers of the firms, the private banks are not interested in financing investments that are not directly productive, and the complexity and delays incurred in application preparation are seen as a deterrent. 17. The projects held over (i.e., those that the firms intend to implement in the years ahead) represent 42 percent of the initial potential savings, for a cost of about CFAF 4,400 million (US$ 17 million, i.e., 33 percent of the total cost of the recommended measures). The main reasons mentioned for their postponement are (a) financing problems, which, in light of the still high return on the projects in question, is more a matter of "transaction costs" than a matter of high interest rates, and (b) uncertainties regarding the current situation of the company. 18. The projects not to be implemented are still economically and financially attractive (average payback period of some 3.6 ytars). The main reason for their rejection by the managers of the firms is technical uncertainties; they either were not convinced or regarded the technique as too new or too sophisticated to be implemented successfully in the local context. Towards More Effective Programs 19. The survey shows that a policy of pricing energy according to its economic cost, in the absence of any other external intervention, markedly improves the efficiency of energy utilization. Nonetheless, Senegal retains a considerable potential that can be exploited profitably. Any program designed to do this should focus on eliminating the barriers to identifying the measures in question and to their implementation. Reducing the Barriers to Identifying Measures 20. The implementation, following the PEEI, of measures enabling energy consumption to be reduced by some 8,000 TOE clearly indicates the importance of the "information" factor in decision-making. The surveys of managers of firms revealed that general information programs (seminars, technical workshops, etc.) have a limited impact. However, two kinds of action were shown to be useful for reducing the technical risks perceived by the decision makers: (a) the provision of high-quality advisory services; and (b) demonstration programs focused on technologies not available in Senegal. 21. The creation of a market for energy services as instruments of technological intermediation is an ultimate objective but one that is particularly difficult to achieve in a country of Senegal's size. The credibility of the services offered depends on their quality, but the size of the potential market necessarily limits the supply and in particular makes it impossible to establish a pool of skills in all areas. Consequently, this development of  - vi - resources can only occur in an area of "replicable" (in technical or equipment terms) activities, which necessarily reduces the potential contribution of local servicesI Hence, in the absence of periodical external intervention, some potential energy savings will inevitably be impossible to exploit because of an irreducible information cost. Implementation of programs aiming at disseminating successful local experiences at the regional level should be encouraged. Promoting Implementation of the Measures Identified 22. Contrary to ideas frequently expressed, especially by industrialists and some government bodies, the provision of financing at subsidized interest rates is not likely to stimulate the process permanently: a. The less expensive measures (less than CFAF 1.6 million, or US$ 60,000) have a very short payback period and involve no major risks, technical or commercial. Appropriate information in the form of audits or demonstrations is often enough to ensure that the majority of these measures are implemented. When this is not so, it is often because a changing context or an upcoming investment with a broader objective makes the measures irrelevant. b. For the more expensive measures (more than CFAF 100 million, or US$ 400,000), uncertainty and technical risks are determining factors; general promotion activities have only a limited effect. The quality of advisory services and the credibility of the auditors then become decisive in the decision making process. The investments held over are often combined with rehabilitation or expansion operations that transcend the mere domain of energy. The availability of specific financing for energy savings has only a limited impact and could even result in antieconomic behavior. C. As regards the intermediate-cost measures, their high financial rate of return (average payback period less than 2 years in the case of Senegal) does not in real terms justify recourse to subsidized interest rates, even if this kind of government interventionI might possibly be warranted when environmental benefits are taken into account. In practice, it is for this kind of project that specialized financing instruments could be envisaged, in order to reduce the relatively high transaction cost. 23. For all kinds of measures, the confidence of the protagonists (industrial and financial circles) in the health of the economy plays a major role: uncertainty over the future of the firm itself or about the short-term trends in Senegal's economy emerges as one of the dominating factors in the postponement or abandonment of projects. Restoring the major macroeconomic equilibria (the objective of the structural adjustment programs implemented with the support of the IMF and World Bank) is unquestionably the best incentive for investment and hence for improving the utilization of energy in industry. About 20% percent of the identified potential savings required only basi skills in the field of electrotechnics and thermal engineering.  - vii - 24. The synergy between the process of industrial restructuring on which Senegal has embarked since 1986 and the PEEI is many-faceted: linkages between investment decisions, adaptation of firms to new economic conditions, and integration of energy-savings measures into broader rehabilitation programs. It is clear that some investment decisions, particularly in this context, transcend energy sector issues. It is essential to take this factor into account in the planning and implementation of a PEEI. The Main Lines of Action of an Energy-savings Program in Industry 25. The structure of the energy-saving measures in the industrial sector is such that more than 50 percent of the potential savings can be realized by implementing less than 15 percent of the total investments recommended. These investments have a low unit cost and involve limited technical risks. Any action aiming at enhancing the efficiency of energy utilization in industry should initially focus on this group of measures, which offers the highest returns and is the easiest to launch. The remaining measures (which, it should be remembered, are often more economical for the country than supply-oriented alternatives) require a more specific and, therefore, more expensive approach in terms of technical assistance or in terms of involvement of the public authorities. It would certainly be futile to suppose that the entire range of economically viable measures could be implemented; the residue has to be regarded as the price to be paid for all the inertia in real systems, whether as regards the transmission of information or the mobilization of resources. 26. Apart from maintaining an energy pricing policy in line with economic costs and promoting general efficiency-enhancing measures in the economy as a whole (particularly improving competitiveness in the banking sector), thus reducing the costs of access to financing, the most promising approach may involve reducing the information gap, as regards: (a) making the public operators in the sector aware of the need for active demand management; (b) pursuing a training and information program; and (c) establishing structures conducive to the development of a local market for energy services. 27. These recommendations are particularly applicable in the case of Senegal, where the audit and training campaign carried out as part of the program should have been sufficient to alert the entire industrial sector to issues of energy efficiency. Complementary government actions should now focus on (a) reducing transaction costs, rather than considering subsidized loans, and (b) pursuing general information activities. 28. Large potential for energy savings exists ir the residential, commercial, and transport sectors. To be effective, any new program in these areas would require targeted efforts and resources, availability of which is doubtful according to the present priorities of the Senegalese government. More effective and achievable would be a deeper involvement of public utilities in demand-side management. Despite its present weaknesses in technical and commercial management, SENELEC should be urged by the public authorities to strengthen its action in the two following areas: (a) development of cogeneration agreements; and (b) development of cooperation with industrial firms (adaptation of contracts, power factor correction) and with the largest consumers (large buildings, commercial sector).  - viii - 29. In more general terms, ESMAP activities in the area of improving the efficiency of energy utilization should now focus on institutional issues: (a) to identify the most efficient operators able to design and supervise information and training programs (Senegal's experience again poses the problem of the choice of mode of intermediation); (b) to identify high-potential technical areas in which individual savings are significant and the techniques demonstrated can be applied to a large number of firms; (c) to design demonstration programs, possibly including targeted audits; (d) to review critically the role and behavior of institutional operators in the sector (tariffs, demand management); and (e) to develop the private sector's role and limit the intervention of public, bodies to stimulate the market for local energy services.  I. THE INDUSTRY AND ENERGY SECTORS IN SENEGAL An Economy in Adjustment 1.1 After a period of relative prosperity, Senegal's economy at the beginning of the 1980s experienced difficulties within an international context that was markedly unfavorable. This led into a stabilization and rehabilitation phase which from 1985 onwards was followed by a series of structural adjustment programs. The austerity policy, implemented with the assistance of the international community, was reflected in a notable improvement in economic performance, especially as regards the reduction of the principal imbalances. The external current account deficit (excluding official transfers) fell from 21.7 percent of GDP in 1982-83 to 9.6 percent in 1988-89, the annual rate of inflation declined from 11 percent in the period 1983-85 to less than 2 percent in 1989-90 and public expenditure, which accounted for 31 percent of GDP in 1981, was cut to 21 percent in 1989. Despite this progress, however, Senegal is still experiencing difficulties: per capita income has stagnated over the past decade and the employment rate has not increased; these two factors have been responsible for social tensions which at times have been sharp. TABLE 1.1: Some General Data on Senegal Population 7.4 million External current account (1989-90 deficit): 8.8% of GDP Area 197,000 km2 Public expenditure: 21% of GDP GDP CFAF 1,427 billion (1987 Inflation: less than 2% in 1989-90 prices) GDP per capita CFAF 192,800 (US$ 642) GDP growth per capita 1980-89: about 0.10% a year The Industy and Energy Sectors in Senegal The Industrial Sector2 1.2 Senegal's industrial sector is relatively diversified in comparison with the other countries in the subregion. It is dominated by the agri-food industry subsector (sugar, flour- 2 This section of the report has been extensively based on data and analyses presented in the document on NIP evaluadon (1992) which was prepared by the Industry and Energy Division for the Sahel region at the World Bank.  - 2 - milling, peanut oil, fisheries and fish preserves), which accounts for almost 30 percent of value added in the sector. The textile subsector, traditionally the second largest (10 percent of value added) has been in a serious crisis since the mid-1980s. Other industrial activities involve metalworking, chemicals, mining, construction materials and paper. 1.3 Overall, the industrial sector is very concentrated (the 40 largest enterprises account for close to 80 percent of value added), comprising some 350 enterprises. The largest companies are controlled by foreign capital and each subsector is generally dominated by two or three companies. The informal industrial sector is particularly well represented in such areas as artisan activities, construction and public works. TABLE 1.2 : The Modem Industrial Sector in Senegal in 1986 Industries No. of Enterprises No. of Employees Value Added Food 116 14,886 52,307 Fisheries and canned products 70 4,720 11,306 Oil mills 2 2,056 7,641 Grain processing 21 1,218 3,954 Sugar and preserves 2 4,842 19,461 Various foodstuffs 21 2,050 9,945 Textile 22 4,933 15,632 Basic industries 11 3,956 13,417 Ready-made clothes and leather working 11 977 2,215 Miicellaneous 149 14,924 88,250 Tobacco/matches 3 563 3,749 Wood 12 509 777 Paper/cardboard 5 226 886 Printing 16 595 2,223 Chemicals 50 3,659 27,182 Mining 1 2,092 15,936 Construction materials 6 492 6,277 Engineering 44 3,302 11,385 Energy 2 3,486 20,115 Construction 80 7,100 n.a. TOTAL 367 41,843 156,459 Soure: Ministry of the Economy and Finance, CUCI 1986.  - 3 - 1.4 Following the stagnation at the beginning of the 1980s, reflected in the decline in the industrial production index from 100 in 1976 to 96.3 in 1986, the sector in 1985 employed a little over I percent of the active population (42,000 out of an active population of 3 million). Employment has declined in recent years (loss of 3,317 permanent jobs between 1985 and 1988, a fall of 9.5 percent; loss of 1,236 seasonal jobs, or 9.8 percent). This overall trend should not obscure the varying movements in different subsectors of activity: although wood, textiles and construction materials have been particularly hard-hit, chemicals, mining and energy have experienced some growth. Meanwhile, the decline in real incomes, especially marked in agriculture, has led not only to a fall in domestic demand but probably also to a shift in the latter toward the informal sector, which has presumably absorbed part of the jobs lost. 1.5 To remedy this situation, the Government of Senegal decided to redefine the objectives and instruments of its industrial policy in order to create a more propitious climate for business development. The principal objectives of this New Industrial Policy (NIP) were to: (a) increase competitiveness and productivity in the industrial sector; (b) enable companies to have more control over their industrial operations by reducing government intervention; (c) disengage the state from regular production activities and; (d) speed up the expansion of the industrial sector, particularly by developing small and medium businesses and changing the industrial structure so as to promote activities with greater value added. 1.6 Implementation of the NIP began in 1986 in the form of an action plan whose principal components were: (a) rationalizing the protection system; (b) revising the export promotion system; (c) making all businesses subject to the ordinary law; (d) eliminating administrative constraints and controls hampering company performance; and (e) easing the legislation pertaining to the labor market. The measures actually taken basically involved reducing protection, lowering and harmonizing import duties and eliminating almost all quantitative restrictions on imports. The Situation at the Time of the Introduction of the PEEI 1.7 Senegal's industry is a sector in convalescence, still hampered by the high cost of production factors (wages, energy, capital), sluggish domestic demand, poor competitiveness in international terms and relatively low production capacity utilization rates. The Cost of Production Factors 1.8 Price flexibility and the freedom to import are still constrained for a large number of companies which depend on enterprises that are the subject of "establishment agreements" that are still in effect; most of these agreements contain monopoly and price control arrangements and are scheduled to disappear only very gradually in the context of the NIP.  -4- The Establshment Agreements Th establishment agreements are arrangements made between a given company (Qften foreign-owned) and the Senegalese State. The agreements graned a range of exemptions.from the ordinary law so t. to increase the profitability of the compans operationsw, reduwe the competition facing it and lessen its commercid irna l risks. Most of the large industrial enterprises have beneflted from establishment agreements: SOCOCIM, ICS, SOTEXICA, the Grands Moulins de Ddkar.... In lght especialy of the cost, regarded as prohibitive, of renegotiating the agreements and -the legal implications of withdrawing from them, the Government has preferred to waitjfor them to expire. Consequently, the agreements have not been terminated at the pace initilly envisage4, and have continued to impose significant constraints o4 it numer ofotherfirms (price rigidity and import bans). 1.9 Reducing the deficit in the public finances, an integral component of the structural adjustment program, could only be achieved (a) by maintaining very high taxes on energy, while world prices were steadily falling; (b) increasing taxation on formal sector companies, which has reduced both their competitiveness and their profitability; and (c) accumulating new arrears to the government, which has created a whole series of difficulties for businesses, particularly since their access to credit was limited by a strict monetary policy. 1.10 Energy prices are a burden on business competitiveness: a comparison between the tuna canning industries in Senegal and Thailand in 1989 indicated that costs of electricity for these industries was four times higher in Senegal. The scarcity and high cost of financing also contributes to business difficulties: real medium-term interest rates are around 13 percent and the banks are extremely cautious toward indebted enterprises with limited borrowing capacity. 1.11 The labor market and wage determination mechanism reforms have only been very partially applied. Specifically, little progress has been made in expanding the scope for the use of fixed-term contracts. Wage and benefit increases in recent years have not promoted the competitiveness of Senegal's industry: the above-mentioned comparison between the tuna-canning industries in Senegal and Thailand also shows that the average unit cost of wages was five times higher in Senegal than in Thailand. Poor International Competitiveness 1.12 It is generally accepted that, in the world economic context of the period 1985-90, financial constraints led to a deterioration in the external competitiveness of Senegal's economy, in that the relative prices of tradable and non-tradable goods could not be adjusted: competition from products imported at much lower prices than those of local products (resulting in particular from the depreciation of the dollar and the currencies of competing  - 5 - countries) has caused difficulties for many businesses at a time when they were trying to restructure. Low Industrial Capacity Utilization 1.13 The deflationary domestic policies have led to a decline in real incomes (significant in agriculture), resulting in lower domestic demand and, as a consequence, tensions on the labor market. It is not, therefore, surprising that production capacity utilization rates are relatively low: a 1990 survey of a limited sam-lAe of companies found them below 60 percent for most respondents. The investment rate is also low; although gross fixed capital formation increased from 9.8 percent of GDP in 1985 to 12.7 percent in 1990, which may seem a satisfactory achievement in this context, the aggregate figure conceals profound disparities: out of 16 industrial sectors, 10 have experienced a decline in investment over this period and only 6 an expansion (energy, chemicals, fisheries, canned fish and the food industry). The Energy Sector3 General Context 1.14 As indicated in the preceding chapter, Senegal is going through a difficult economic and social period. In addition to these situational factors, it is also encountering major natural resource difficulties in the management of its energy potential, namely, sustained deforestation and the lack of any immediately exploitable fossil or water resources. In a social and economic context that reduces its scope for decision and its options, Senegal thus faces, in the management and development of its energy sector, major constraints linked to: (a) a resource endowment characterized by a shortage of primary energy sources and the degradation of natural forests; and (b) the inefficiency of its energy production and consumption systems. The Macroeconomic Framework and the Energy Sector 1.15 The macroeconomic policy pursued by Senegal, especially through the adjustment programs, has on the whole provided a framework conducive to increasing energy sector efficiency. Two factors have been of particular importance in this regard. First, the effort to achieve budgetary equilibrium has led, on the one hand, to a reduction in state subsidies and in direct intervention in the energy sector, and, on the other hand, to the introduction of a policy of high prices for commercial energy. Second, the process of state disengagement has been reflected in the granting of a certain (although insufficient) autonomy to operators in the energy sector, a trend which must be encouraged in the years ahead. 3 Information in this section has been extracted from various documents, notably those prepared by the Senegalese authorities for the Donors meeting on the energy sector.  - 6 - 1.16 Energy is an important variable in the attempt to achieve external equilibrium; imports of oil and oil products have accounted for 20% to 25% of Senegal's total imports and have been a major factor in its external imbalances, although as a result of recent price changes on the international market this impact has declined in relative terms in recent years (10% to 15% of imports). Senegal's export potential has hitherto lain in its natural resources (peanuts, phosphates, fish products), for which international markets have tended to stagnate; export growth possibilities, at least in the medium term, are limited. Reducing energy imports as far as possible, on economic conditions, will thus remain an important economic policy variable. 1.17 The impact of this economic environment is especially evident in the following facts: a. The demand for modern commercial energy, a reflection of the general level of economic activity, has been relatively stagnant over the past 10 years. The demand for oil products has basically been stable at around 600,000 tons a year since 1980. The growth in electric power demand has slowed down sharply, declining from 7 percent a year in the period 1973-80 to 3.2 percent in 1980-85 and 2.4 percent in 1985-89. b. Oil products have become the favorite target for taxes to raise revenue. In 1989 these taxes yielded close to CFAF 60 billion, or about a quarter of all budget receipts. Considerations of budgetary equilibrium are constantly at the heart of all the discussions and decisions regarding the prices of oil products and indeed of most forms of energy in Senegal. Natural Resource Endowment 1.18 At present, Senegal has basically only a single domestic means of meeting the demand for primary energy (1.9 million TOE a year in the period 1985-88), namely, biomass. Local production of natural gas has been negligible (less than 1 percent of primary energy production). The balance of the demand for primary energy has been met entirely by imports of crude oil or oil products (600,000 tons a year on average). See the 1987 energy balance in Annex 2. 1.19 Senegal currently has a limited potential for expanding its primary energy resource base. a. Hydropower Resources. Senegal has no hydropower resources.4 The regional project to produce and transmit electricity from the Manantali dam, on the Senegal River in Mali, represents Senegal's only prospect of obtaining hydropower. It would not, however, enable Senegal to free itself in any permanent or comprehensive way 4 There are some suitable sites on the Senegal (fflou) and Gambia (Kekreti) Rivers. However, their development is only conceivable as part of larger investments projects, such as the Manantali project and the expansion of the electricity transmission network.  - 7 - from its primary energy constraint and to significantly reduce its dependence on biomass. b. Hydrocarbon Resources. Senegal's sedimentary basins have raised hopes or offered prospects regarded as promising, but the results obtained up to now have been disappointing. c. Peat Resources. Senegal has reserves of peat in the Niayes region. Studies carried out in recent years led to the abandonment of the idea of using peat to produce electricity in favor of its use as a domestic fuel, in place of charcoal in particular. Potential production volume varies from 30,000 to 60,000 tons a year (over a 20-year horizon) according to the quality of the technical procedures that could be used. However, exploitation is not presently economically viable. d. Other Local Resources. Potential solar energy resources and, in part of Senegal, wind energy resources are significant. Senegal has made a number of efforts in the area of research and preparation of pilot programs, but the exploitation of these resources is still difficult and at the present time almost non-existent. The Efficiency of Energy Systems 1.20 In spite of the progress already made, Senegal must still tackle major inefficiencies in its energy consumption and supply systems. In general terms, demand management has markedly improved as a result of a very vigorous pricing policy and the implementation of specific energy conservation programs, among them the PEEI discussed in this report. This policy has even led to prices for electricity and oil products that exceed economic costs (except for butane which is subsidized in order to help its promotion as a substitute for charcoal). 1.21 Electricity production remains notably inefficient. The heat rate of the thermal power plants has not improved in the last 15 years. The overall efficiency of the MV and LV transmission and distribution network has deteriorated; evaluated at 84 percent in 1977, it steadily declined to 79 percent in 1988, reflecting a significant level of technical and commercial losses. This situation can be attributed to several factors, particularly the age and obsolescence of electrical installations, and institutional constraints (problems in the technical and commercial management of installations: size of non-technical losses, problems in debt recovery, "specially in the public sector, multiplicity of objectives and missions given to the public utility. Energy Policy Objectives and Instruments 1.22 The period since 1981 has seen the gradual introduction of an energy policy designed to reduce Senegal's external dependence on oil imports and ease the pressure on the environment. These objectives are still the basis of its energy policy, but four other considerations are assuming growing importance in the formulation of this policy:  -8 - (a) strengthening the role of price systems; (b) introducing greater transparency into relations and financial flows between the energy sector and the rest of the economy; (c) reducing the cost of energy; and, finally (d) expanding the opportunities for access by the rural population to electricity. 1.23 Development of more appropriate institutional frameworks, improvement of traditional and commercial fuels demand and supply efficiencies will remain areas on which Senegal strategy should focus over the coming years. Pricing Policy 1.24 The reforms undertaken by Senegal during the 1980s were reflected, in general terms, in high prices for oil products (see the oil products price structute for 1987 in Annex 2) and electricity (see the detailed SENELEC tariff in Annex 3). 1.25 Oil products, with the notable exception of butane gas, are subject to very high taxes and have been considered as a major source of revenue. In the last quarter of 1990 the ex- refinery prices of oil products were three times their economic cost5 for gasoline and twice that cost for fuel oil. The estimated annual fiscal levy, on the basis of these prices, is CPAF 60 billion, including a deduction for a subsidy on butane gas of the order of CFAF 2.7 billion. Senegal should make every effort to introduce transparency and rationality into the rules for establishing the level and structure of oil product prices and the mechanisms for raising revenues. 1.26 In 1985, electricity prices were readjusted to reflect the structure of long-term marginal costs on the SENELEC system and to cover the costs of operating the network. After a slight fall in 1986 (of the order of 4 percent), designed to pass on very partially the decline in fuel costs, electricity prices have remained practically stable to the present time (a new 3 to 5 percent decrease in tariffs was decided in 1991). Operating inefficiencies, the oversized network and ancient equipment, along with the taxes imposed on SENELEC's fuel supplies, are responsible for the high level of prices. Energy Sector Objectives 1.27 To improve the overall efficiency of the energy sector, the Senegalese Government will have to design its strategy according to the following objectives: a. Improving power system operation and electricity quality service, and developing the system according to the least-cost options. Senegal's response, up to now, has been to introduce performance contracts between Government and SENELEC, and to strengthen management capabilities in SENELEC. This approach has led to very limited achievements, and the Senegalese Government should now consider more radical institutional changes. 5 This cost being defined on an import parity basis.  - 9 - b. Designing new policies and strategies for rural electrification, more in line with current limited public resources. c. Establishing an institutional and regulatory framework enabling private participation and market-oriented mechanisms. In the petroleum subsector, the government is promoting research and exploration of hydrocarbons by foreign companies through an attractive petroleum code, which will alleviate the burden on public resources. However, regarding import, refining, transportation and distribution of petroleum products, revision of the price structure for a greater transparency and systematic introduction of competition enabling mechanisms are the necessary next steps for a satisfactory functioning of the petroleum subsector.  - 10 - II. THE CONFIGURATION OF THE PEEI Energy Management in Senegal 2.1 The actions taken by Senegal in the area of energy management were until 1985 focused on ene-gy prices. As already mentioned in Chapter 1 of this report, significant reforms were undertaken in 1985, very largely dictated by public finance considerations and designed to increase fiscal receipts from sales of hydrocarbons and to balance the accounts of SENELEC. In addition to this action, which resulted in extremely high energy prices, Senegal had also taken certain other relatively limited steps, namely some general studies, carried out in 1983-84, and some semi-detailed audits in large buildings (hotels particularly). The Recommendations of the 1984 Energy Audit 2.2 In 1984, ESMAP studied the issues and options facing the energy sector in Senegal.6 Following this assessment, it was recommended that a specific energy conservation program be implemented in conjunction with price measures, particularly in the industrial sector, where it was considered that the density of consumption would make intervention more efficient. It was also recommended that a new Office of Energy Conservation (Bureau des Economies d'Energie - BEE) be established within the central government to replace the existing agency, which was regarded as ineffective. It was following these recommendations that the principle of implementing an Energy Conservation Program (PEEI) in industry was agreed between the Senegalese authorities, the World Bank, UNDP and ESMAP. Structure of the PEEI The General Configuration of the PEEI 2.3 The PEEI was executed in three successive stages. a. The first stage, financed by UNDP using CIP7 resources in the amount of US$ 479,000, began in 1986, its objective being to define the institutional framework within which an energy savings program in the industrial sector would be implemented and to define the aims and content of this program. 6 Senegal: Issues and options in the Energy Sects.* ESMAP Report. 7 Chiffres Indicatifs de Planification (Indicative Planning Figures). These are UNDP resources specifically allocateJ by eountry.  -11 - b. The second stage was launched in 1987, and was financed in the amount of Can$ 1,100,000 by Canada, through the CIDA. The objective was to carry out energy audits in a dozen industrial enterprises. c. The third stage continued the preceding activities. Initiated in 1988, with an overall budget of Can$ 3,034,000, and financed entirely by Canada (CIDA), the objective of this stage was to extend the audits of industrial enterprises and co.iduct training activities. In 1990 this stage was extended by one year to complete the support activities to industrial enterprises, broaden the scope of the training and information activities, and enable the impact of the program on Senegal's industry to be evaluated. The purpose of this chapter is to describe the arrangements for the different stages, specify their objectives, describe the activities undertaken and comment on the resources used. Program Participants 2.4 The following participants were involved in the different stages of the program: a. The Directorate of Energy and Mines in the Ministry of Industry, Trade and Crafts (MICA) was the national counterpart agency and, in this capacity, was responsible for coordinating on the Senegalese side all the technical and administrative aspects of the program. The Directorate of Energy was specifically responsible for: (i) program guidance, selection of enterprises to be audited, monitoring and oversight of consultants; (ii) development of the institutional framework and PEEI management procedures; (iii) negotiation and conclusion of service contracts with a consulting company to supply technical support to industrial enterprises, together with supervision of consultant services;8 (iv) organization of sensitization and information campaigns on energy conservation. b. Canadian International Development Agency (CIDA). CIDA was the financing agency for the last two stages of the project. The CIDA regional office in Dakar was made responsible for overall monitoring of project execution and played a key role in the decisions leading to its extension. c. UNDP. It financed the first stage of the project. d. The World Bank. In the last two stages of the project the World Bank managed the trust funds made available to Senegal by Canada on a grant basis. This contribution was incorporated as the technical assistance component in the First Energy Sector Rehabilitation Project financed by IDA (Credit SEN-1710). e. ESMAP. ESMAP was responsible for project execution during its first stage, financed by UNDP. In this capacity ESMAP directly coordinated all the operations and 8 In the first stage, financed by UNDP, the contracts with service providers were made directly with ESMAP, since it was responsible for project execution.  - 12 - services provided to Senegalese institutions and prepared service contracts with consulting companies. In the final two stages of the project, ESMAP assisted and advised the Directorate of Energy and supervised the execution and evaluation of activities. f. Consultants. The services of a number of consultants (firms or individuals) were used in works execution. The consultants principally prepared institutional and programmatic studies during the first stage of the program and energy audits during the two final stages. The First Stage of the Wor'ks: Preparation of the Program Objectives and Content 2.5 The objectives of the first stage were essentially to define an appropriate institutional framework for managing energy programs, define the content of an energy program, and assist the Senegalese authorities in the preparation and launching of this program. The main components of this activity consisted of: (a) seconding a permanent advisor to the Directorate of Energy for a year; (b) preparing a study on the institutional environment and formulating recommendations to enhance it; (c) conducting a survey on energy consumption in the industrial sector; and (d) preparing arrangements to continue the program. Results 2.6 This phase made it possible to sensitize the various potential actors regarding the PEEI and to obtain sorely needed information on energy consumption. The results, however, were somewhat limited insofar as: a. No institutional decisions were actually taken: in particular, the institutional arrangements which were to govern the implementation of the program (namely, the establishment of a new BEE) were not made. b. The actual content of the program to be implemented remained imprecise, being limited to an indication of the need to establish a mechanism for financing investments as a prerequisite for successful execution of the program. C. Nonetheless, this stage made it possible to mobilize Canadian resources and experts for Senegal, and, hence, to provide the financing needed to pursue program activities.  - 13 - The Later Stages of the Works: Energy Audits and Training Objectives 2.7 The essential objective, right from the initial stage of the program, was to provide industrial enterprises with direct support and high-quality advice and hence to eliminate what was regarded as one of the major constraints to conserving energy, namely the inadequate information of managers regarding potential energy savings in their companies and the possibilities of exploiting this potential. This approach was strengthened by the simultaneous existence of high energy prices and a considerable conservation potential, confirmed by the overall assessments made by various technical missions. A secondary objective was to train BEE agents in energy audit techniques and to strengthen BEE's institutional capacity by giving it additional physical resources. Finally, during the second part of the PEEI, it became growingly apparent that a third objective should be added, namely to facilitate the direct participation of energy sector professionals in the PEEI so as to develop and strengthen the analytical capacity of local private-sector energy specialists. Interrelationship of Activities 2.8 Activities in the second stage largely focused on providing advisory services to companies; the following list summarizes the main activities carried out during these two stages: (a) execution of energy audits and specific studies; (b) training actions: (i) seminar and technical presentations, (ii) training of BEE agents, company managers and local specialists, (iii) sensitization activities vis-a-vis commercial banks and industrialists; and (c) program evaluation. Intervention Procedures 2.9 The AIICA was responsible for detailed programming of activities, with continuous assistance from ESMAP. In general, decisions were jointly taken. The most critical issues involved the choice of companies to audit and the content of the complementary studies. Generally, the intervention program was defined after consultation between BEE and the consultant and approval by ESMAP. Energy Audits 2.10 During the last two stages taken together, 47 companies were audited in depth. The criteria governing their selection were as follows: viability of the company in the context of ongoing restructuring (the selection was preceded as a matter of course by a financial analysis), overall energy consumption, potential energy savings in absolute and relative terms, general attitude and interest of the managers in energy conservation. Since certain recommendations entailed major technical choices, justifying additional analysis, specific implementation studies were carried out at the request of the companies concerned. Among the issues tackled the following may be mentioned: (a) installation of a high-capacity plate heat-exchanger to avoid  - 14 - contamination of industrial wastes; (b) improving the efficiency of a turbo-alternator; (c) optimizing peanut storage; (d) improving the load factor by installing compensation equipment; (e) compacting of bagasse; and (f) insulating freezer pipes. Training Actions 2.11 The training programs carried out under the PEEI were aimed at three kinds of targets: a. Central government personnel (essentially staff of the BEE). The training took the form of study visits overseas (Canada, Tunisia, C8te d'Ivoire), seminars at Dakar and active participation in energy audits. It was designed to provide knowledge and a set of methods for the planning and implementation of energy conservation programs, the introduction of specific financing mechanisms and the execution of energy audits. Most of this training took place during the first stages of the PEEI and involved ministry personnel directly concerned in the energy conservation programs (less than a dozen persons). The principal issues dealt with were (i) industrial planning techniques, using specialized software, (ii) project management, (iii) the introduction and utilization of a database on industrial energy consumption. During a study trip to Canada, three BEE agents were given special training in energy management and the design of action plans, through direct contact with Canadian counterparts. A methodological guide to executing energy audits in industry was also prepared by the international consultant. In addition, these training activities were complemented by other institution-building measures, particularly the supply of equipment and computer programs. Very profitable collaborations have been launched between the Senegalese Energy Department, the Tunisian Energy Conservation Agency (AME), and similar Ivoirian institutions, where similar processes were ongoing. b. Providers of energy services. As part of the execution of the PEEI, it seemed useful to undertake a training program focused specifically at energy audit service- providers. This program was carried out in conjunction with a local energy consulting firm (operating principally in the area of maintenance of electrical systems), and by recruiting young Senegalese university graduates to the teams of the international consultant. This kind of training used the apprenticeship system and was complemented by more formal training sessions on specific technical issues organized at Dakar by the international consultant. c. Employees of the industrial enterprises. This training had a double purpose: (i) general energy conservation techniques (tuning of boilers, load factor improvement, etc.); and (ii) introduction of certain technologies relatively little-known in Senegal and capable, according to the energy audits, of generating substantial energy savings: the technology of inverse osmosis (for purifying boiler water) and heat exchangers were discussed at special technical sessions that provided opportunities for international professionals and industrialists to meet.  - 15 - d. As an extension of the above-mentioned training actions, the PEEI included various demonstration and sensitization activities, aimed at industrialists, central government personnel (except for MICA) and banking institutions. A seminar and workshops on investments and energy conservation were proposed, with the participation of the various ministries concerned, local banks and international donors. Information sessions designed particularly for Senegalese commercial banks were organized, during which the methodology for performing energy audits was explained.  - 16 - III. THE RESULTS OF THE ENERGY CONSERVATION PROGRAM Evaluation of the Program 3.1 The results of the energy conservation program were evaluated in mid-1991, i.e., two or three years on average after the detailed audit results were communicated to the companies concerned. Clearly, an interval is needed that is long enough to ensure that the program's contributions are only assessed after an appropriate waiting-period, and that the enterprises have had the opportunity to incorporate the recommendations into their development strategies, but not so long that the context of each enterprise undergoes great changes and that a posteriori observations become meaningless. Principal Objectives 3.2 The principal aims of the evaluation were: a. To determine in concrete terms the extent to which the objectives of the PEEI had been achieved, and to assess the results. b. To draw lessons from the program in order to make the necessary amendments, if required, to improve the effectiveness of possible later programs. One of the main objectives was to arrive at a better understanding of the way in which energy conservation measures were selected and implemented, and hence to identify the principal obstacles in this process. c. To plan and prepare future activities in Senegal, and specifically to contribute to the ongoing study of the most appropriate institutional framework for implementing the government's strategy in this area. d. To provide donors with information enabling them to identify better their role in such operations, e.g.: should this kind of audit be continued, what kinds of enterprise should be selected, what is the most appropriate level of detail, and how should the institutional/organizational framework for these kinds of activities be defined. e. To use the results of experience to target ESMAP activities more effectively as regards energy conservation in industry in developing countries. A Questionnaire as the Main Tool of the Survey 3.3 Sending the same detailed questionnaire to each company proved to be the most appropriate method for collecting precise and homogeneous information; it also facilitated  - 17 - computerized data processing, which the sample size (47 companies audited) made an attractive option. In the vast majority of cases, interviews with the managers of the company, either when the questionnaire was delivered or collected after comple.ion, provided further, more precise information. The two local consultants assisted with the distribution and collection of the questionnaires; they also participated in a certain number of audits as members of the Dakarelectro company. 3.4 The questionnaire (see Annex 5) was divided into four parts: (a) description of the company; (b) the company's view of the program before and after implementation; (c) description of the measures recommended; and (d) implementation status of the measures and explanation for delaying or dropping the project. 3.5 The processing of the survey data made it possible, since the size of the sample reduced the impact of specific situations to: (a) give a precise content and values, in the Senegalese context, to widely-used concepts in the area of energy conservation (potential savings, effects of internal rate of return or unit cost thresholds, etc.); and (b) adopt an unbiased approach to the highly controversial question of the financing of investments. An Entirely Satisfactory Response Rate 3.6 The response of the companies to the survey was excellent, and seems to indicate their highly positive perception of the program: in practice 39 out of 43 companies responded to the questionnaire, which, given the fact that 4 firms went out of business between the date of their audit and the evaluation, represents a response rate of 90 percent. However, it was often difficult to obtain data on the companies' level of activity, the reasons invoked for not communicating this information being: (a) its confidentiality; (b) the non-representativeness of the current level of activity; and (c) the temporary unavailability of these figures. A Balanced and Representative Sample 3.7 Of the 39 companies, 5 employed less than 100 people on a continuous basis at the time of the audit, 19 employed between 100 and 250 people, 11 employed 250-1,000 people and 4 employed over 1,000 people. 3.8 At the time of the evaluation, the sample contained not a single entirel. public enterprise: there had been three enterprises in this category but two were subsequently privatized and one went bankrupt. Of the companies in the sample, 14 were private firms with exclusively Senegalese capital, 10 were private firms with exclusively foreign capital, and 15 were mixed companies. The market for which these companies work is also very well- balanced, since 11 stated that they supply only the local market, 12 that they produced entirely for export while 16 had both internal and external outlets. 3.9 The sectcrs of activity of these companies are very representative of industry in Senegal: 6 belong to the fisheries subsector, 12 to the agro-food subsector, some of these being also linked to fisheries, and 4 to the textile subsector. The other subsectors represented  - 18 - are soap production (1), metal construction (3), phosphate mining (2), chemicals (3), plastics processing (2), printing (3), construction materials (2), and cardboard box manufacturing (1). Energy in the Sample of Companies 3.10 Total energy consumption by these enterprises before implementation of the recommended conservation measures was 167,440 TOE in a typical year. This consumption can be broken down as follows: 102,331 TOE. of plant residues9 (61 percent), 13,137 TOE of electricity, or 150 GWh (8 percent) and 51,941 TOE of different oil products, such as fuel oil (1,500 and 3,500), diesel oil and natural gas (31 percent). Total consumption (Toe) o85% U Electricity 31.03 0 Petroleum 3 8 31.03% products 61.12% ; Vegetal residues FIGURE 3.1: Consumption by Type of Energy 9 Plant residues mainly consist of peanut hull, sugr cane an wood (mnufacung of matce).  - 19 - The Contribution of the PEEI to Energy Conservation A Well Received Program 3.11 The perception of the program by the companies has a very important impact on the sustainability of the energy conservation approach; it is clearly necessary to ensure that any positive perception should not merely be the result of the short-term availability of special benefits, but of an awareness of its technical and methodological contribution. In this context the fact that the program did not include any subsidized financing mechanism makes it likely that the assessment was reasonably z3bjective. 3.12 The companies' opinion of the program was very favorable: 33 out of 39 (85 percent) regarded it as useful or even very profitable. The audits themselves were seen favorably by 80 percent of the enterprises, while the study sessions received a 54 percent positive response. The quality of the audit teams, as regards their professionalism, the relevance of the advice given and the way in which it was communicated, was appreciated (27 termed this quality excellent and 10 average). The audits were regarded as having a very positive impact, whether in terms of revealing new and hitherto unsuspected opportunities for energy savings (41 percent of companies) or by providing further technical or economic justification for the implementation of a measure already identified (56 percent of companies). Financing of the Audits by the Companies: Still Some Way to Got 3.13 Before the audits, only six companies were ready to contribute to meeting their cost. Nineteen companies were ready to consider such a contribution after becoming aware of what the benefits of such an analysis might be. None of this group, however, could contemplate spending more than CFAF 5 million (US$ 20,000) for a new audit (the average cost of an in- depth audit was about CFAF 14 million - US$ 55,000), unless it was much more closely targeted at issues they regarded as important. Even the companies most disposed to make such contributions could not and would not meet the costs of in-depth audits carried out by foreign firms. As will be seen below, the audits would have been a very profitable investment even when carried out by international consultants. It is nonetheless most important to stimulate a local supply of competent, cheaper local services as a result of each demonstration operation. 3.14 The 13 companies (33 percent) who persisted in refusing to finance an audit did so above all because their financial position did not allow them to contemplate new expenditure even if this would have been useful; only 4 companies said that they refused to pay because the audit did not bring them anything new.  - 20 - The Audit Estimates Were Generally Regarded as Reliable 3.15 The interviews with the technical managers of the companies showed that the real costs of making the investments, far from having been under-estimated by the consultants, were very accurate or even sometimes over-estimated, either because the companies performed some or all of the work on their own, or because, by incorporating the work into other projects, they managed to reduce its cost (25 percent of the measures implemented were incorporated in this way into other operations). It should be pointed out that the consultants were made particularly aware of the need to provide realistic estimates, given the very damaging effects on the credibility of the program of any exaggerated optimism in this area. 3.16 The information regarding the savings on energy consumption is much more difficult to interpret. In the few companies that continuously and reliably monitor their energy consumption and for which a meaningful comparison is possible, the stated gains seem to have been achieved; but in most cases the shortage of data, changes in the level of activity or a significant alteration in the nature of the activity make any meaningful comparisons impossible. In the absence of any information that clearly calls the estimates of the consultants into question, we have used the audit figures in our analysis. Potential Savings: 15 Percent of Total Consumption 3.17 According to the recommendations prepared following the audits, the potential savings available on satisfactory rate of return conditions (payback period less than six years) was 24,380 TOE (14.5 percent of total initial consumption), broken down as follows: (a) 14,767 TOE of plant residues (14.4 percent of initial consumption); (b) 745 TOE of electricity (5.6 percent of initial consumption), equivalent to 8,500 MWh; and (c) 8,868 TOE of oil products (17.1 percent of initial consumption). Implementation of these measures called for a total investment of CFAF 13,110 million, producing an annual financial gain of CFAF 5,380 million, giving an average payback period of 2.4 years. Execution Rate 3.18 The overall cost of the measures identified was CFAF 13,110 million. Of these total investments, 19 percent have been or are being implemented, 33 percent have been postponed to a later date and 48 percent have been abandoned. The investments made represent 32 percent of potential savings in TOE or 5 percent of total initial consumption and 35 percent of expected annual financial gains. The investments postponed represent 42 percent of potential savings in TOE and 31 percent of expected anrnual financial gains. The investments abandone I represent 25 percent of potential savings in TOE and 33 percent of expected annual financial gains.  -21 - The Profile of the Projects Selected 3.19 The total cost of the projects implemented is CFAF 2,426 million, equivalent to 18 percent of the cost of all the proposed projects. Forty-five percent of the projects have been implemented; more detailed examination of these projects indicates that more than 60 percent of those with a payback period less than one year have been implemented, along with 53 percent of projects with payback periods of between one and two years and 43 percent of the projects with a payback period between two and three years. 3.20 The total estimated gain from these projects is CFAF 1,927 million (36 percent of estimated total gains). These projects represent 7,715 TOE of savings (31 percent of the total), which includes 2,180 TOE of oil products (25 percent of total potential savings in this form of energy) and 485 TOE of electricity (65 percent of total potential electricity savings). TABLE 3.1: Characteristics of the Execution of the Recommendations Potential Savings Potential Savings Investments Savings Achieved (Postponed) (Abandoned) Total 31% 42% 26% Electricity 65% 20% 14% Oil products 25% 35% 41% Plant residues 34% 49% 17%  - 22 - FIGURE 3.2: Characteristics of thie Execution of thie Recommendations 3.21 The projects that save on electric power seem markedly more attractive to the companies than the other projects. The prices of energy for industry, whether as regards electricity or oil products, are either at or above their economic costs. The unit costs of projects providing electricity savings are on the whole not high, since for the most part these projects involve measures more akin to current maintenance than investment properly so- called. This may explain the benefits in terms of payback period and average unit cost illustrated in the table below.  - 23 - TABLE 3.2: Payback Period for the Recommended Measures Payback Payback Payback Average Average Period Period Period Cost Cost Investments (Total) (Implemented) (Postponed) (Implemented) (Postponed) Electricity 1.5 0.7 3.4 10,000 74,000 Oil products 2.8 1.3 2.7 17,300 147,000 Plant residues 2.5 1.6 3.2 45,000 131,000 Systematic Recourse to Self-financing 3.22 The investments made were self-financed virtually across the board. Only 4 out of 112 projects were financed through a subsidized loan made available by Switzerland to the Government of Senegal for energy conservation investments. The total cost of these four projects was CFAF 277 million. According to informal interviews that took place when the questionnaires were distributed or collected, the reasons given for not going to the banking system were: (a) the lack of interest shown by the banks in this kind of investment (this is disputed by the bankers thenmselves); (b) the complexity, daration and sometimes the unpredictability of the procedures for preparing dossiers; and, finally (c) the cost of bank loans. (Real interest rate on medium-term credits is about 12 percent). Benefits of the Program 3.23 Some of the effects of the program are not directly quantifiable, such as increased government awareness of the opportunities offered by deliberate action in the area of energy conservation, the sensitization and training of the technical managers of the companies involved in the audits, or that participated in the information sessions and seminars, or the training of national consultants who participated in the project. 3.24 Had the companies borne the cost of the audits, the internal rate of financial return for the program as a whole could have been calculated as follows: Discounted cost of the PEEI: US$ 5,170,000 Investments: US$ 9,700,000 Annual financial gains: US$ 7,700,000 Internal financial rate of return: 43 percent, if the useful life of the investments is assumed to be five years.  - 24 - 3.25 This high rate of return is derived only from the measures actually implemented. Even though the measures postponed have a lower rate of return, their implementation will not substantially alter the overall financial rate of return of the PEEI, since the fixed cost of the program will be amortized over a larger volume of investment. 3.26 In economic terms the calculation is a littler trickier; if the direct gains are bound to be smaller, given that commercial energy prices in Senegal are higher than economic costs (approximately 20 percent more on average for electricity and 100 percent more on average for oil products), the cost of the investment should also be reduced, taking shadow wages in particular into account, and externalities should be included (reduction of local pollution and the greenhouse effect as a result of lower consumption). 3.27 The reduction in gains resulting from using the economic costs of energy would on a first approximation be of the order of US$ 2,400,000 (US$ 880,000 for electricity, US$ 1 million for oil products and US$ 520,000 for plant residues). On this assumption, the internal economic rate of return is still 23 percent. This is certainly an underestimate, since we have only incorporated the negative adjustments. Implementation Conditions of the Measures: the Structure of the Projects Profile of Investments Recommended 3.28 Two hundred forty-five projects were recommended following the detailed audits, which represents an average of six measures in different areas of each companyl. These projects have been classified in the six categories shown in the following table. I 0 A table giving more details on these mcasures can be found in Annex 6.  - 25 - TABLE 3.3: Profile of Measures Recommended Total Cost Total Gain Average Energy CFAF Average CFAF Payback Savings Item No. (000's) Cost (000's) Period (TOE) Contract amendment 19 10,000 526 64,200 0.2 -1.8 Maintenance measures 97 720,000 7,423 499,100 1.4 4,933 (insulation/sealing) Equipment 85 4,140,600 48,713 2,859,000 1.4 6,931 replacement Process modifications 34 2,230,000 68,235 954,000 2.4 10,344 Storage optimization 5 5,850,000 1,170,000 970,100 6.0 2,126 Various measures 5 76,000 15,200 19,500 3.9 47 TOTAL 245 13,116,600 53,537 5,365,900 2.4 24,379.2 3.29 a. The heading "Contract amendment" covers all measures concerning the updating or modification of contracts linking the companies to the electricity and water enterprises. These adjustments may involve adapting the subscribed demand to the actual demand for power or the number and nature of supply agreements. In the case of water it may also involve digging and operating wells. It should be noted that these measures entail no reduction in energy consumed, the only objective being to reduce the cost of energy to the companyl 1* b. "Maintenance measures" covers all the low-cost measures that can be incorporated into routine maintenance operations. It includes the measures involving heat recovery, better sealing and optimization of lighting. c. The category "Equipment replacement" includes investments to improve the load factor, control and command systems, internal electrical installations and any replacement of equipment directly linked to the industrial process. d. "Optimization of storage" is a special category: these very expensive projects involve the installation of specially designed warehouses for conserving and storing peanuts. 1 1 They may even lead to an increase in energy cosumption (water wells). A few interfuel substitution measures (LPG or heavy fuel to electricity) have the same impact.  - 26 - They relate only to the four companies in the SONACOS group, which specializes in processing and marketing peanut products. General Characteristics of the Measures 3.30 The total estimated cost of the projects (CFAF 13,110 million), can be broken down as follows by type of energy: * CFAF 2,900 million (22 percent of the total cost of the recommended measures) for projects reducing electricity consumption. o CFAF 6,710 million (51 percent) for projects reducing consumption of oil products. * CFAF 3,500 million (27 percent) for projects reducing consumption of plant residues. This breakdown is approximate since a number of projects impact several sources of energy simultaneously. 3.31 The total financial gains associated with the implementation of ttiese measures have been put at CFAF 5,376 million, broken down as follows by type of energy: * CFAF 1,794 million for measures essentially involving electricity savings. * CPAF 2,282 million for oil products. * CFAF 1,300 million for plant residues.  - 27 - | * Investments | Expected benefits 14000- 12000- 10000* 8000- Tnotal Petroleum products Vegetal residues Electricity FIGURE 3.3: Potential Identified by Type of Energy Execution of Investments 3.32 The various execution stages were differentiated as follows: measures adopted (already executed or in process of execution); measures held over (measures probably to be executed); and measures abandoned. a. Out of 245 recommendations, 112 have been executed or are in the process of being executed (46 percent), 66 will probably be executed later (27 percent) and 67 will probably never be implemented (27 percent). b. The payback period (ratio between the annaal gain and the investment cost) is unquestionably the most important criterion for project execution: the average payback period of the projects executed is 1.3 years (112 projects), that of the projects held over is 2.6 years while that of the projects abandoned is 3.6 years.  - 28 - C. The unit cost of the investment is also a significant consideration in the company's decision: 50 percent of the measures costing less than CFAF 100 million have been executed or are in th. process of execution, while only 12 percent of those costing more than CFAF 100 million have been implemented. Importance of the Payback Period in the Decision to Go Ahead 3.33 A detailed analysis of the execution status of the projects according to length of payback period confirms that, in line with expectations and previous experience, the most rapidly profitable projects are the first to be executed. TABLE 3.4: Project Status According to Payback Period Project Cost Payback Period Executedifotal Held OverfTotal Abandoned/Total PP<1 75 24 1 I<PP<2 22 46 31 2<PP<3 76 18 6 PP>3 5 34 60 3.34 The table shows that, for investments with payback periods less than three years, 52 percent have been or are in the process of being executed, 30 percent have been held over and only 17 percent have been abandoned. If the focus is on energy conservation, a similar picture is revealed, as the following table shows. TABLE 3.5: Savings (TOE) Achieved Following the Projects (%) Payback Period Executed/Total Held Over/Total AbandonedITotal Total PP<I 44 54 2 100 l<PP<2 3 1 42 27 100 2<PP<3 48 36 17 100 PP>3 22 41 37 100  - 29 - 3.35 For projects with payback periods shorter than three years, 35 percent of the potential savings have already been achieved, 43 percent have been postponed and 21 percent will not be achieved, at least in the form recommended in the audits. For projects with payback periods longer than three years these percentages become 22 percent, 41 percent and 37 percent respectively. 3.36 The approach taken by company managers therefore reveals a focus on projects with payback periods shorter than three years. If it is assumed that energy conservation measures have a useful life of some five to six years (one would suppose that beyond that period, the company's technical context will have changed to the point where it would no longer be meaningful to continue to ascribe any effect to a specific conservation measure), the implicit discount rate for the companies can be put at more than 40%. 3.37 This "conservative" behavior by the company should not be regarded as having particularly damaging consequences for energy management. Indeed, the structure of the energy conservation measures is such that the across-the-board implementation of projects with payback periods of shorter than three years would enable 7) percent of the potential savings (17,350 TOE) to be achieved for 28 percent of the total cost of the recommendations (CFAF 3,700 million), giving a discounted average cost of CFAF 51,000 (US$ 186) per TOE. (Annex 7 shows the structure of potential savings). The Impact of Unit Costs on Company Decisions 3.38 Company decisions are of course based on individual considerations. Nonetheless, the processing of the survey data reveals relatively homogeneous behavior vis-a-vis the unit cost of the projects; as the following tables show, it is possible to identify thresholds governing company behavior in relation to investment opportunities.  - 30 - * Dropped Postponed *implemented * *Eu ~U..1600- i1600<U .C.....OOOOO.... U:7.C.>100 To-t.a-, 80- _- ; 70- l _::I 30 +. (Percentage of Total Cost)  - 31 - Dropped E Postponed Implemented 100- |u 90 i 80- U-.C. <1600 1600<cU.C.< lOOOOO U.C. >1lOOOOota FIGURE 3.5: Impact of the Unit Cost of the Projects (Percentage of Total Savings) a. The first threshold, or the limit for no-cost/low-cost measures, seems to be around CFAF 1.6 mill.on (US$ 5,800). Below this threshold, 60 percent of the projects were implemented shortly after the audit. These measures can actually be regarded as current maintenance: here they consisted almost 50 percent of measures to improve lighting and 14 percent of insulation measures. b. The second threshold is around CFAF 100 million (US$ 360,000). Below this figure 50 percent of the recommended projects have been executed. The medium-cost measures (investments falling between the first and second thresholds) involve projects specifically linked to energy conservation, but with short payback periods and limited technical and financial risks.  - 32 - 36 percent of these measures involve replacing equipment, 21 percent partial changes in procedures and 14% heat recovery measures. Below CFAF 100 million, the average payback period for all the investments undertaken is 1.2 years, which is even lower t1an the average payback period for investments above CFAF 100 million already executed (2.2 years). Forty-eight percent of the medium-cost measures were/are being implemented entirely by self-financing, which, added to the self-financed zero or low-cost measures, means that 30% of potential energy savings were achieved through the companies' self-financing capacity, for a cost representing less than 9% of the total cost of the measures recommended. However, given the structure of the projects, there remain, among the non- implemented projects whose unit cost is less than CFAF 100 million, some very profitable measures in economic and financial terms; 21 percent of the zero or low- cost measures and 27 percent of the medium-cost measures have been held over, although their payback period is very low (of the order of 1.5 years on average). The reason most often cited (35 percent of cases) for this postponement is the wait for financing. If all the projects with a unit cost below CFAF 100 million which currently have been held over were also to be executed, this would mean that more than 50 percent of the potential savings (or 12,000 TOE) would be achieved for 14.8 percent of the total cost of the recommended measures (i.e., CFAF 1,950 million), which would give a discounted average cost per TOE saved of CFAF 40,000 (US$ 140). Since the companies have already undertaken CFAF 1,190 of investment, the remaining expenditure needed to ensure the attainmcnt of 50 percent of the potential savings would be some CFAF 760 million (US$ 2.8 million) for the 39 companies covered by the survey. c. The measures whose unit cost exceeds CFAF 100 million are much more heterogeneous than the two groups described above, because they are more branch- specific; more than 50 percent of these measures consists of storage optimization projects (involving only the SONACOS group, specializing in the production of peanut oil), while 20 percent pertains to replacement of equipment and 17 percer.t to changes in industrial procedures. 3.39 The classification of energy-saving projects according to their unit costs has been the subject of much analysis by experts who have studied and been involved in energy management issues in the developing countries. There are many references to 'housekeeping measures" or "no-cost or low-cost measures" to describe the first subset. The upper limit of this subset in Senegal's case can be put at between CFAF 1 million and CFAF 2 million. The upper limit of the second subset, covering medium-cost measures, would be around CFAF 100 million. The analyses made under this program therefore confirm those produced  - 33 - elsewhere and enable concrete values to be given to the theoretical thresholds, at least as far as Senegal is concerned. Behavior Varying by Company 3.40 Private, foreign-owned companies have a much higher than average rate of project abandonment; their execution rate is 4% and their postponement rate 23%, as against overall averages of 19% and 33% respectively. This is probably attributable not to their being less aware of the return on good energy management, but on the contrary to their having already exploited the most profitable part of this potential: their potential energy savings, as revealed in the audits, did not exceed 9% of their consumption, the corresponding average figure being 15%, and the payback period for their recommended projects was more than 4 years, against an average of 2.4 years. The situation is exactly the opposite for entirely locally- owned companies: potential savings estimated at 22% of initial consumption, payback period 2.2 years and above-average execution rate (27% implemented, 58% held over). The Impact of Energy on the Company 3.41 The importance of energy for each company clearly depends on the nature of its activity. It was possible to obtain reliable data on each company's turnover. To assess the importance of energy for the company, we therefore used an indicator of the energy intensity of the company's activity: company's total energy consumption in a typical year Energy intensity = --------------------------------------------- (Enerint) number of full-time employees This makes it possible to define consumption per employee, a (very limited) indicator of the energy intensity of the activity. 3.42 The application of this criterion to the survey data produced results that initially were somewhat surprising, in that the highly energy-intensive companies were not significantly quicker to make investments to save energy, as the table shows. TABLE 3.6: Impact of the Energy-intensive Companies Total % Projects % Projects Consumption Total Savings Executed Postponed Number (TOE) (TOE) (Costs) (Costs) Entire sample 39 167,440 24,366 32 42 Enerint<l 13 2,426 852 62 29 l<Enerint<10 17 8,893 2,302 28 34 Enerint>10 9 156,121 21,212 31 44  - 34 - 3.43 In practice there are two explanations for this paradox: (a) the difficulty of giving a realistic value on the TOE of plant residues for the SONACOS oil mills (peanut shells) and the CAFAL match factory (wood residues); and (b) the fact that the average project cost increases, in the sample studied, with the "energy intensity" of the company's activity. The Problem of Plant Residues 3.44 When economic benefits of investments were estimated, the TOE of plant-residues saved was valued in terms of its equivalent in substitutable commercial energy: for peanuts, for example, it was assumed that I kg of empty shells can produce 0.72 kWh of electricity, and this kWh was valued at CFAF 36. This figure was adopted throughout the audits. 3.45 In practice, although a few limited electricity sale agreements have been made between the companies and SENELEC (CSS, SEIZ), the possibilities of cogeneration are not receiving as much attention as they deserve, especially from SENELEC. It is therefore not surprising that substantial and profitable conservation measures in this area have not been implemented by the companies, given the uncertainty regarding the existence of outlets for the tons of plant residues saved. The Question of the Average Cost of Projects 3.46 As the table below shows, the average project cost for the companies for which Enerint>10 (CFAF 145 million per project) is much higher than the general average (CFAF 53,500,000 million per project). TABLE 3.7: Project Costs in Energy-intensive Companies Average Costs % Projects % Projects Executed Postponed (Costs) (Costs) Entire sample 53,500 32 42 Enerint> 10 145,000 31 44 UC>CFAF 9 million 150,000 18 33.5 Entire sample excluding plant residues 46,400 28 35 Enerint>10 ex;luding plant residues 169,000 27 35 UC>CFAF 11 million 168,000 17.7 33.5  - 35 - 3.47 The project execution rate in the highly energy-intensive companies is in line with the general average, regardless of the exclusion or otherwise of projects yielding savings of TOE of plant residues that are difficult to value (see previous paragraph). At a given average cost, of the order of CFAF 150 million, 18 percent of the projects whose unit cost exceeded CFAF 9 million have been implemented, as against 31 percent of the projects in highly energy-intensive companies. Likewise, at a given average cost (CFAF 170 million), 17.7 percent of the projects where unit cost e.xceeded CFAF 11 million have been implemented as again,t 27 percent of the projects (excluding savings of plant residues) of the highly energy- intensive companies. 3.48 When these adjustments are made, the energy-intensive companies appear to be, as expected, the most anxious to conserve energy. Projects Postponed for Lack of Financing? 3.49 The total cost of the projects held over was CFAF 4,367 million (33 percent of the total cost of the recommended measures). The expected total gain from these projects was CFAF 1,680 million (31 percent of the total of anticipated gains). These projects represented 10,395 TOE of savings (43 percent of the potential identified), including 3,060 TOE of oil products (35 percent of the relevant potential) and 155 TOE of electricity (21 percent). 3.50 The main reasons for postponing projects, according to the survey data, were: (a) the present situation of the company; and (b) the lack of financing. A very large majority of these projects (98 percent of total costs) was postponed for more than a year or for an indefinite period. 3.51 The lack of financing, mentioned in relation to 55% of the projects, in fact covers several overlapping difficulties. a. A lower return: the payback period is 2.9 years, compared with 1.5 years for projects postponed for other reasons. b A high unit cost: the average cost of the projects postponed explicitly on financial grounds is CFAF 106 million, while the average cost of the other projects held over is CFAF 18 million. c. Dossier preparation is perceived as a long, difficult and uncertain process. The initial difficulty in finding financing (administrative complexities of preparing dossiers, long wait for funds) leads to a refusal in principle to consider traditional bank loar. solutions; pragmatic financial analysis is abandoned, and attention focuses on some imaginary financing, either interest-free or at very subsidized interest rates, this being perceived as the obvious, necessary complement to a program like the PEEI. The attitude underlying this behavior is that it is quite enough to have to put up with bureaucratic hazards, and that having to factor in normal rates of interest is intolerable for this kind of project.  - 36 - d. The critical position of certain individual companies: this makes them regard any project not directly linked to their immediate survival as a diversion of resources; consequently, it can only be regarded as feasible on a grant basis. Projects Abandoned Because of Technical Uncertainties 3.52 The total cost of these projects was CFAF 6,300 million, or 48 percent of the overall cost of the measures proposed. The total expected gain was CFAF 1,767 million (33 percent of total estimated gains). These projects represented a potential savings of 6,270 TOE (26 percent of the total identified) including 3,630 TOE of oil products (41 percent of the total for that subsector) and 106 TOE of electricity (14 percent). 3.53 The causes of the definitive rejection of these projects seemed to be more technical than economic; in 45 percent of such cases, the projects were dropped because they appeared too complex and in 73 percent of them because the technical managers were skeptical about the effectiveness of what was proposed (it should be noted that managers could give a number of explanations for abandoning any project). The present situation of the company was also mentioned, even though this would only justify the postponement of the project. 3.54 The importance of technical uncertainty is highlighted by the fact that only 3 percent of projects involving (partial) changes in the industrial process were implemented. Of course, the fact that these projects are more expensive than the average (CFAF 68 million as compared to CFAF 53 million) is certainly one explanation, but technical uncertainty seems to be the dominating factor, since of the projects requiring significant changes of equipment, 50 percent - a much higher figure than the average of 18 percent - were executed; although these projects too were more expensive than the average (CFAF 76 million), they did not, in the minds of company managers, contain any major technical unknowns.  - 37 - IV. LESSONS DRAWN FROM THE PROGRAM The Need for a Catalyst 4.1 Although for some years the prices of energy in Senegal have been equal to or even higher than their economic costs, the audits nonetheless identified a not insignificant savings potential (15 percent of the companies' consumption) that could profitably be exploited. The detailed audits showed that all the companies, whatever their status and market, could significantly enhance their energy use. It was diemonstrated that even the local subsidiaries of the major private-sector multinational groups had some scope for profitable investments, i.e., to reduce energy consumption by some 5 percent to 10 percent, and to facilitate or accelerate their implementation.12 4.2 It should nonetheless be pointed out that the level of the potential savings identified in Senegal (15 percent) is at the lower end of the 15 percent to 30 percent range regularly cited as the potential for energy conservation in industry in the developing countries.13 This result is no doubt attributable to the very favorable impact of pricing commercial energy at levels close to its economic costs and also to the limits of this "price effect." 4.3 Although the companies, given their behavior, have very high implicit discount rates (on a rough estimate, over 40 percent), the structure of the recommended measures is such that 71 percent of the potential savings (or 10.5 percent of initial consumption) is still profitable when this rate is used, and could be achieved if the obstacles associated with risk perception were removed. These obstacles relate to: (a) the identification of energy savings measures; and (b) their implementation. The remainder of this chapter discusses these two issues. Obstacles to the Identification of Measures 4.4 Evaluation of the PEEI reveals a number of obstacles: a. Technical managers are not always fully aware of the attractive possibilities of reducirig energy consumption. 1 2 The managers of the Nestle company, for example, immediately implemented the suggestions made. 1 3 Cf. "Energy Efficiency and Conservadon in the Developing World; the World Bank's Role," draft report, 1992, by the Industry and Energy Department.  - 38 - b. Even if they are aware of the benefits of certain measures they do not always have the skills to enable them to provide proper technical/economic justification for these projects, reduce risk perception by decision-makers and eliminate the skepticism encountered by this kind of proposal. c. The expertise they lack is rarely available locally, where the supply of energy services is either inadequate or non-existent. The initial cost of international expertise acts as a deterrent to all the companies, although experience shows that the vast majority of energy audits are still profitable operations, even in these circumstances. 4.5 External intervention is therefore necessary in order to: (a) demonstrate, through appropriately budgeted projects, that there is substantial scope for savings in the country concerned; (b) inform technical managers in the industrial sector about the most promising areas of energy conservation; and (c) through the transfer of know-how, create a local supply of energy services. The Organization of Demonstration Programs 4.6 It is not possible to draw formal conclusions from the evaluation of the PEEI as to the optimum configuration of a national energy management support program. It is clear that a program like the PEEI is a delicate instrument, in relation to which not only should actors be reasonably well motivated but their interests should coincide with the objectives set. a. The beneficiaries of the services (namely industrial companies) can only be properly motivated and their active participation obtained if they are ins olved right from the designing stages of the program. Hence the need for a mediating organization well aware of the real situation in the sector, close to the companies, known to them and enjoying their trust. Various institutional schemes may be considered, depending on the specific conditions prevailing in any country (importance of the energy consumption, size of the industrial sector, administrative structures ...). An autonomous body, similar to what has been done in Tunisia, Pakistan or Thailand, is a feasible solution, but it does not seem to be appropriate in the Senegalese context, due to the lack of sustained attention and effort for energy conservation by the government. Light structures supported by professional organizations may in some cases be more appropriate bodies than central government structures like the BEE. b. Management and decision making procedures and responsibilities within the program must be clearly specified so as to (i) avoid conflicts of interest among the many program participants; and (ii) organize relations among these actors; giving advice to companies, for example, must be regarded and treated as the provision of services  - 39 - (involving a client and supplier) and must not be seen as a form of intervention and control by administrative entities over the management of independent companies.14 c. Neither the direct interests, nor in particular the survival of the institutional participants (such as the mediating organization) should be linked to the continuation or extension of the program. 4.7 Assuming that such conditions are met, the main lines of an intervention program in the industrial sector can be set out as follows. a. The program should focus on executing projects targeted in such a way as to cover the main branches of activity and kinds of energy existing in the country and making a significant contribution to sector consumption. One major concern should be the replicability of the approach used and the main measures recommended. Here it is worth pointing out (see box) that focusing the program on medium-size companies (250-1,000 employees in Senegal's case) seems to offer the best guarantees of effectiveness. It would also seem preferable to give priority attentioyi to locally- owned companies so as not to overlap with operations often carried out in systematic fashion by the major multinational groups.15 A Crtero for Seketng Copanies for a Dexonstaion Pra-gAm Ta evaluXe the impact of the PEEL on the companies, the e te s t nervention was measud by looking at the execution ratias fr th re no nti - prqposed Thee srios were defined for (a) nvestment costs; (b)- finac gal gans;! aid (c) energy gains. The following table shows the ratios obtained. 1 4 This problem arises when dealing with parastatal enterprises, since private sector companies have the option (and used it in Senegal) to refuse advisory services. I S Even if, as already noted, the latter can benefit from this kind of assistance.  - 40 - TABLE 4.1: Effectiveness of PEEI Intervention 100-250 250-1,000 >1,000 <100 employees employees employees employees % companies 13 49 28 10 Effectiveness 0.2 3 1 1 5 (investments) Effectiveness 0.8 3 16 16 (gains) Effectiveness 0.5 4 23 6 (energy) _~~~~~~~~~~~! _ The diagnostic activities should be performed by high-level specialists capable of enabling the companies to benefit from advanced techniques adapted to the local environment. Even though certain measures may be implemented using specific financing mechanisms, the projects should show a positive financial return at prevailing local credit conditions.  - 41 - 60 so2 I K 2l is 2 i1' Eff implementod prjecskecommended projects P = staff FIGURE 4.1: Program Effectiveness According to the Size of the Firm b. The dissemination of results should be an integral part of the demonstration program, via seminars, workshops, technical visits, etc. c. Transfer of know-how is an important objective so as to ensure the sustainability of energy management in the country. One of the most effective ways of achieving it is for the international experts associated with the project to work in systematic collaboration with local specialists. These local specialists should be sought first in existing firms engaged in related areas of activity, such as maintenance activities or equipment distribution to the companies. It would be futile to think of establishing new, autonomous companies, and fruitless to provide comprehensive training for  - 42 - individuals outside the existing framework. Technology transfer is expected to be more successful in areas such as industry electrotechnics and thermics, since those technics are widely used in industry. One program component should be devoted to investigating and systematically exploiting potential synergie' with local technical training organizations so as to ensure constant renewal of the supply of energy services while minimizing training costs. d. Advisory services should be provided on terms close to market conditions, so that the completion of the program does not come as a sudden break; in particular, it is important that, at least, part of the cost of these services should be borne by the beneficiary companies. Obstacles to Implementation of the Measures Decision Criteria 4.8 Analysis of the measures implemented shows that the companies' decision to proceed is based on three principal criteria: the financial return (payback period less than three years), the unit cost (less than CFAF 100 million) and the technical risk (limited). When a measure meets these three conditions it is implemented, if the firm is capable of doing so, via self-financing. These selection criteria were responsible for the execution of measures representing 19 percent of total costs and more than 30 percent of potential energy savings. This portion might be regarded as the potential savings susceptible of direct mobilization following an awareness-building campaign. 4.9 At the margin, there will have to be ever-stronger incentives to implement each additional measure beyond this base, as the return on further projects grows smaller and they become increasingly expensive, although remaining, of course, economically and financially profitable. 4.10 To get a better idea of the shape of these incentives, it is necessary to look in more detail at the structure of the projects not immediately implemented. a. No- or low-cost projects. Sixty percent of the projects whose unit cost was less than CFAF 1.6 million (no- and low-cost projects) were implemented. The reasons cited for the postponement or abandonment of the remainder of this group do not seem to * arrant specific external intervention: basically, they involve changes of context that made the project nonviable or the impossibility of collaborating with the enterprises responsible for electricity and water, a point to which we will return below. b. Medium-cost projects. Forty-eight percent of the projects with a unit cost somewhere between CFAF 1.6 million and 100 million (medium-cost projects) were implemented. The reason most commonly cited for the postponement of 27 percent of these projects was the difficulty of finding financing. Execution of all the low- or  - 43 - medium-cost projects currently held over would enable 50 percent of potential energy savings to be mobilized for less than 15 percent of the total cost. The volume of funds required to achieve this result is very modest, and was calculated at CFAF 760 million for the 39 companies studied. Given the high rate of return on this group of projects (average payback period less than two years), it seems pointless to think in terms of a subsidized financing scheme, which certainly would not remove the real obstacles to project execution. It would seem preferable to devise mechanisms targeted at the medium-cost measures (less than CFAF 100 million) and designed to reduce transaction costs, which are (i) the administrative formalities of preparing dossiers (stability and simplicity) and (ii) the time taken for funds to be agreed and made available. Demonstration activities and operations to transfer know-how should also be aimed at developing the supply of specialized local services in the preparation of dossiers and their presentation to the banks. c. High-cost projects. The group of postponed or abandoned projects whose unit cost exceeds CFAF 100 million is much more heterogeneous than the preceding groups. Likewise, the incentives to implement them are more expensive, even in terms of transaction costs. Nonetheless, they offer economic rates of return that are higher than almost all of the projects to develop supply, particularly if the costs associated with environmental protection (externalities) are included. Subsidized Rates to Take Account of Externalities? 4.11 The incorporation of these externalities at the national level could be used as an argument for the provision of subsidized financing, the energy conservation premium corresponding to the avoided cost of the harmful effects associated with any energy consumption (production of electricity or consumption of petroleum products or of plant residues). Experience shows that the implementation of such solutions is better left in the hands of professionals in the private banking sector. 4.12 Furthermore, it has been shown that the obstacles to implementing these projects are for the most part not financial, but essentially involve technical unknowns and the companies' uncertainty regarding macro- and microeconomic developments (company "shortsightedness"). Consequently, special financing provisions may lead to unintended, non- economic effects, benefiting among others the "free riders."  -44 - Reducing Uncertainty and Risks by Demonstrating Techniques 4.13 Approaches to financing differ according to the types of energy conservation investments: a. Low-cost and no-cost measures have very short payback periods, and should, therefore, be financed by the firms on their own resources. b. High-cost measures, involving procurement of costly equipment or modification of the industrial process, will be financed under credits targeted at industrial development. C. Targeted financing mechanisms might be useful for the third category of measures, the "medium-short investments". Here again, the profitability of most of the measures does not make it necessary to consider subsidized rates. The targeted financing mechanisms should rather aim at reducing "transaction costs" such as delays and cumbersome administrative procedures. 4.14 To some extent technical uncertainty can be reduced by specific initiatives, which could include demonstrating the viability of modem techniques within a country while the company is protected by insurance policies paid for by the public authorities. The projects in question must be carefully selected in light of their macroeconomic impact and replicability in the local context. In the case of the PEEI, the use of the technique of ultrafiltration by inverse osmosis in the plants in the SONACOS group would be a plausible candidate for this kind of operation. Reducing Uncertainty Through Transparency in Inter-company Relations 4.15 It would also seem that technical uncertainty could be reduced if cooperative actions were launched and encouraged; cooperation between private businesses in a given sector is certainly not the business of the public authorities, and we may expect spontaneous initiatives to develop within professional organizations. On the other hand, the public authorities have a role to play in the area of encouraging a dialogue between public enterprises in the energy sector (especially, of course, in the electricity subsector). The deliberate encouragement of better circulation of information and more transparent relations should reveal large areas in which the interests of the partners are converging and should facilitate joint projects. The most promising areas to be investigated in collaboration with the largest industrial consumers are cogeneration. joint investments for power factor improvement and special contract agreements. It is therefore essential that, within the public enterprises in the energy sector, alternative methods of reducing demand should be systematically examined during the planning process, on the same basis as the altematives for developing supply. Govemment guidelines have a role to play in this area, as do the recommendations of intemational donors.  - 45 - Improving the Economic Environment 4.16 The traditional "shortsightedness" of companies, reflected in high implicit discount rates, is even more evident when the macroeconomic situation does not give grounds for optimism. For the same reason, the banks are also less willing to lend to companies that are "on the edge." The best way to reassure these actors is to restore the confidence of industrial and banking circles in the economy. This is the objective of the efforts being made under the structural adjustment programs, which are working indirectly, by encouraging potential investors and donors, to bring about more efficient utilization of energy in industry.  - 46 - V. TOWARDS FUTURE ENERGY CONSERVATION PROGRAMS IN SENEGAL A Potential Largely Realized in Industry 5.1 The PEEI and other initiatives undertaken previously have resulted in the maximum possible mobilization of existing potential savings, by reducing the information and know- how constraints which may have affected the principal industrial enterprises. It seems unlikely that anything more can be done for the companies that have already been audited; they have been made aware of energy efficiency issues, and above all they are in possession of in-depth technical analyses of their potential savings, thus enabling them to prepare investment projects. Therefore, any new industrial energy conservation program should be launched only after in-depth analysis, notably based on the results of this program. 5.2 As regards the small and medium companies, there may be a certain potential to be mobilized through advisory services and technical support. The cost of supplying these services would be excessive from the standpoint of the likely gains for the nation. Furthermore, local capacity for organizing this kind of program is very limited. For this remaining segment of the industrial sector, a centralized approach and systematic recourse to international expertise would lead to excessive transaction costs; energy pricing incentives and the use of local consultants on market terms probably represent the best solution. Some Potential in the Residential, Commercial and Institutional Sectors 5.3 In technical terms these sectors contain some potential for energy conservation, especially electricity (air conditioning and lighting). Despite the high energy prices, this potential results from a number of market imperfections or rigidities, weak motivation to conserve energy (energy users are not those paying for it, certain companies can pass on energy costs as a result of limited competition, etc. ...) and inadequate information. a few specifications have been launched in this sector, notably general awareness campaigns, electrical audits of large buildings (hospitals, offices, etc. ...) and support to solar water heaters distribution. 5.4 The basic problem is to determine the most appropriate way of intervening in an area where decision-makers are numerous and mobilizing them is difficult. The central government is not equipped for this kind of activity. In principle, the operator most adapted and concerned would be SENELEC, especially given its current inability to meet peak period demand. Moreover, SENELEC must face up to many other constraints that considerably curtail its capacity to direct demand management programs. 5.5 Priority should therefore be given to action directed towards a few large consumers such as public buildings (moreover, they are late payers) and large hotels. Action towards  - 47 - households should be limited to public awareness campaigns. Strengthening of SENELEC institutional and managetnent capabilities is a prerequisite for it to be able to undertake broader demand manage:nent strategies. 5.6 The transportation sector certainly presents a good potential for energy conservation and urban pollution reduction. However, implementation of programs in this area is complex, notably due to the influence of non-energy factors on the decisions (capital cost of vehicles, urban infrastructure, limits in public transportation). Household Fuels 5.7 This is definitely the area in which an improvement in energy systems would have the greatest economic and social impact. This ubsector accounts for some 52 percent of total energy consumed in Senegal. There are multiple inefficiencies on both the supply and demand side as a result of (a) price distortions (for example, regarding the cost of wood); (b) institutional shortcomings (uncontrolled exploitation of forestry resources, unsuitable forestry regulations), and (c) lack of information regarding the most efficient technologies (charcoal production, improved stoves). 5.8 Furthermore, the stakes are considerable: traditional fuels represent 86 percent of energy consumption in urban households and 99 percent of consumption in rural households. Hence, this is an area that is sensitive, significant in size, and where there is considerable potential for progress; all this justifies Senegal giving it priority attention and the international community providing support, at least if appropriate measures are implemented, notably in the areas of price and regulation. The most urgent measures are (a) strengthening government's ability to design, supervise and evaluate programs; (b) continue to stimulate interfuel substitution (use of LPG, kerosene stove dissemination) and to promote improve charcoal and wood stoves.  - 48 - ANNEX 1: LIST OF THE TECHNICAL REPORTS PREPARED DURING THE PEEI In-depth audit reports for the following firms: ICOTAF SIPS SCT NSOA SAIB INTERCO DAKAR MARINE CAFAL FUMOA CSS SNTI SISMAR CSPT SEIZ AMERGER PSOA LA ROCHETTE SENEGAL PROTEINES SNCDS SERAS SAFCAC ETS. GUIEYESSE SEIB SAPROLAIT NEMAS SSPA SOSEFIL AFRICAMER ADRIEN MICHEL SOCOFROID SAFINA AGROCAP SAF CARTONNAGES DE DAKAR SEIL NESTLE CARNAUD SSPT CCV SENAC ETERNIr MTOA SNSSS SIGELEC SED BLANCHISSERIE DU CYGNE STS SENEPESCA SAII 2. Reports on complementary studies concerning: * A super plate-exchanger. a Optimization of peanuts storage. * Bagasse compacting techniques. * Turbo-alternators efficiency improvement. e Power factor improvement. * Insulation of deep-freezing tunnels. 3. A detailed methodological guide for energy audits. 4. A report on possible financing mechanisms for energy conservation programs.  Year. 1988 Unit: 000 Toe ENERGY BALANCE Primary Energy Final Energy Vegetal Petroleum Total Wood Petroleum Gas Residues Charcoal Electricity Products 1 Gross energy 1,942 1,019 732 88 33 150 > production z 2 National production 1,063 1,019 3 8 33 m 3 Imports 993 757 236 4 Exports - 88 - 88 5 Inventories variation - 26 - 28 2 6 Processing m 7 Refining SAR -705 705 0 8 Charcoal production - 162 162 9 Electricity generation - 6 262 -256 (SENELEC) m 2 10 Electricity generation -16 32 -16 I (other) ___ 11 Losses - 642 -365 -27 -2 -13 -235 > 12 Net energy 1,300 492 17 149 59 583 production __ _ _ _ _ _ _ __ _ _ _ _ _2 13 Tanking - 103 103 14 Fmal consumption 1,197 492 17 149 59 480 15 Industry 148 17 44 87 16 FLsheries 56 56 17 Transport 303 303 18 Housebolds 692 492 149 14 37 19 Hotels 2 1 37 20 Statistical errors 4 4 Sour: Ministry of Industry, Commerce and Crafts.  EVOLUTION OF RETAIL PRICES FOR PETROLEUM PRODUCrS Gasoil Fuel Oil Gasoline Premium for Fishing Eectricity Gasoline Gasoline fishing Kerosene Vehicles Boaos Boats Diesel 180 CST 380 CST Generation June 1985 350 335 155 185 210 150 105 199.160 111.945 111.945 81.400 July 1986 350 335 155 185 210 150 105 199.160 111.945 111.945 69.336 December 1987 350 335 155 185 210 150 105 199.160 111.945 111.945 69.336 May 1988 350 335 155 185 210 150 105 199.160 111.945 111.945 69.336 June 1989 350 335 155 185 210 150 105 199.160 111.945 111.945 69.336 0 December1989 350 335 155 185 210 150 10j 199.160 111.945 111.945 69.336 June 1990 350 335 155 185 210 150 10S 199.160 111.945 111.945 69.336 December1990 350 335 155 185 210 150 105 199.160 111.945 111.945 69.336 FCFA/I SoreData published by Senegalese authorities, 1990.  STRUCIrURE OF PETROLEUM PRODUCIS PRICES (January 1, 1991) Premium Gasolinefor Diesel Fuel Oil Fuel Oil Fuel Oil 380 Gasoline Gasoline fishing Kerosene Gasoil Diesel SENELEC 180 CST 380 CST SENELEC Out of SAR HT price 7,824 7,419 7,419 8,778 7,373 84,078 84,078 44,307 39,720 39.720 Duties 3,521 3,339 0 3,950 3,318 37,835 37,835 19,938 9,930 9,930 VAT base for SAR 11,345 10,758 7,419 12,728 10,691 121,913 121,913 64,245 49,650 49,650 VAT SAR 3,857 3,658 0 2,546 3,635 8,534 8,534 4,497 3,476 3,476 Stabilisation 11,378 11.166 4,874 - 110 2,514 46,700 - 13,066 34,939 43,103 5,891 SAR sale price (VAT 22,723 21,924 12,293 12,618 13.205 168,613 108,847 99,184 92,753 55,541 exclude SAR sale pnice (taxes 26,580 25,582 12,293 15,164 16,840 177,147 117.381 103,681 96,229 59,017 inchJded) .. Distributfion markcup 2,725 .2,460 2,382 2,111 1,944 17,518 13,941 12.171 11,868 9,259 (a) entry expenses 142 142 142 142 142 1,269 853 1,258 1,255 853 (b) storagelosses 182 175 98 50 53 674 435 198 186 111Iu (c) transPottexpenses 650 650 650 650 650 1,563 1,563 1,563 1,563 1,563 (d) distributio costs 295 228 228 156 101 1,402 942 9279268 (e) ovedww ~646 528 528 413 348 5,127 3,445 3,388 3,380 2,297 (f) financial costs 641 606 606 517 544 5,851 4,049 3,674 3,423 2,073 (A) benefit 169 131 130 183 106 1,632 2,654 1,163 1,136 1,729 V.AT bae 25,448 24,384 14,675 14,729 15,149 186,131 122,788 111,355 104,621 64,800 VAT ~~~~8,652 8,291 0 2,94 5 151 13,029 8,595 7,795 7,324 4,536 Pricetoretailer 34,100 32,675 14,675 17,675 20,300 199,160 131.383 119,150 111,945 69,336 Retailer marhrp 900 825 825 825 700 Sale price to the consumer FCFA/hl 35,000 33,500 15,500 18,500 21,000 FCFAII 350 335 155 185 210 FCFA/Ton 199,160 131 383 119,150 119,945 69,336 Source: Ministry of Ixdustry, Commerce and Crafts, 1991.  52 - Diesel oil