1 / 25

Power Sector PPPs in Africa: Challenges and Opportunities

This High-Level Workshop explores the potential for Public-Private Partnerships (PPPs) in Africa's energy sector, with a focus on the power sector. It discusses the benefits of PPPs, the financing needed, and the types of projects that can be implemented. The workshop also highlights the challenges faced by large power PPPs and provides conclusions on the way forward.

mpatnaude
Download Presentation

Power Sector PPPs in Africa: Challenges and Opportunities

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. UNECA High Level Workshop PPPs in Africa’sEnergy SectorJames LeiglandUNECA Consultant June 29, 2011 Addis Ababa

  2. Questions • Why start with power? • Can PPPs help? • How much help is needed? • What are the key types of PPP projects in the power sector? • What is the biggest challenge for large power PPPs? • Conclusions

  3. Why Start with Power?

  4. Power sector in crisis Electricity infrastructure is central to economic growth and poverty reduction, but SSA’s… “…is the least developed, least accessible, least reliable, most costly to operate, and, on average, highest priced of any region in the world.” Source: U.S. International Trade Commission, 2009

  5. AICD: SSA is a global outlier Generation capacity (MW per million population) Electrification rate (Percentage of households) Electricity consumption (kWh per capita per year) Power prices (US$ per kilowatt-hour) Source: AICD , Preliminary Results, 2008

  6. Impacts • Business sector: • Face 56 days of outages per year • Lost sales revenues • 5-6% formal sector • 20% informal sector • Equipment damage cost 1% sales revenue • Most large firms run generators $0.40/kwh • Social services: • Lack of illumination/refrigeration in health services • Absence of lighting affects education • Power disproportionately affects most other sectors

  7. Causes • Small systems: • 23 systems < 200 MW - 36 systems < 1,000 MW • Inefficient technology: • SSA has 10% of world’s hydropower resources – less than 1% exploited (65% coal) • Management inefficiencies: • cost $6 billion per year • Precipitating factors: • drought, conflict, oil price shock

  8. Can PPPs help in the power sector?

  9. Widely used in developing countries Current US millions Globally, 45% of PPI went to power in 2009, in SSA only 3.5% Source: PPI Project Database

  10. Global performance • Generation benefits: 2/3 of IPPs in 12 countries resulted in… “…investment leading to power generation, at prices and quality levels that met reasonable government expectations” (Woodhouse, 2005) • Distribution benefits: 160 PPPs vs. 90 SOEs… • decreased distribution losses by 11% • increased bill collection rates by 45% • increased the electricity sold per worker by 32% • increased number of residential connections by 29% (Gassner, et al., 2009)

  11. SSA performance • Modest spread: • ¾ have some form of PPI in power sector • 1/3 have IPP projects • 7 have more than one IPP • Documented benefits: • IIPs have been an important source of new investment in the power sector • the majority of projects have delivered and their contracts have been upheld • the performance of IPPs is generally superior to that of state-owned plants (Eberhard & Gratwick, 2010) • Notable IPP successes: Kenya & Cote d’Ivoire • Massive new IPP programs: Nigeria & Ghana

  12. How much help is needed?

  13. SSA’s power sector needs = 61%of required new investment Source: AICD 2010

  14. Actual capex – little PPI for power US billions Source: AICD 2010

  15. Additional funding needed US billions Source: AICD 2010

  16. Additional funding needed US billions Source: AICD 2010

  17. What are the key types of PPP projects in the power sector?

  18. Types of PPI projects in power • 20 IPPs in 10 years; average size = 91 MW • IPPs essential but remain marginal in SSA • SAA’s available generating capacity (without SA) (less than Argentina, Thailand, or Turkey) • 7 distribution concessions in 10 years • Important because of massive rehab needs (60% of assets) • Huge risks require extensive mitigation • Example: Umeme in Uganda • 8 mgmt or lease contracts in 10 years • Efficiency improvements crucial • Seem to meet targets but often blamed for sector-wide problems • Examples: Tanesco and KPLC

  19. Regional Hydro IPPs • The need for hydro IPP projects is clear • Nepad, AU, RECs recognize the need for large hydro IPPs • Power projects much more attractive over 200mw • Regional hydro would allow power trading • But performance has been disappointing • STAP unsuccessful • Only two national-level hydro IPP in last decade (Bui & Bujagali) • Key countries: DRC, Ethiopia, Guinea • Need for power “exporters” and “importers” • Inga III illustrates problems with truly regional hydro IPPs • Key role of national governments • Will PIDA help?

  20. What is the biggest challenge for large power PPPs? • Project preparation funding • and expertise

  21. Upstream preparation adds to costs in SSA

  22. Preparation in LICs – Hugely expensive • How much does PPP preparation cost in the UK? • 2005 study of downstream preparation costs on 55 UK PPPs: • Government = 3.5% • Winning bidder = 3.8% • Losing bidders = 5.0% About 12% of capital value • How much does PPP preparation cost in a LIC? • 2010 DFID-funded study of upstream costs plus downstreampreparation costs: • Government = 3-5% (for upstream prep) • Government = 4-5% (for downstream prep) • Winning bidder = 4-5% • Losing bidders = 6-7% • Premium = 2-3% (for new/difficult sectors) About 19-25% of capital value • Minimum total govt prep costs on a $100m IPP (72 mw) >$8m

  23. Project preparation – What is needed? • Who has money for PPP project preparation? • DevCo/IFC Advisory, Nepad IPPF, DBSA prep funds, REC funds, EU-Africa ITF, InfraVentures, WB trust funds (PPIAF, GPOBA, etc.), PIDG facilities • But not enough money or expertise for large PPPs • What happens if grant funding is insufficient? • Delayed start-up, delayed draw-downs • Rigidly sequentialpreparation • Increased costs, overall delays, project misfires • What is needed? • Special donor funded facility for large project preparation • To provide funding plus preparation expertise • $300 million needed for 3-year pilot period – just for power

  24. Conclusions • Power is central to growth & poverty reduction • But SSA’s power sector is in crisis • PPI in power is important in other regions (44% of PPI) • But only 3.5% of total PPI in SSA – a fraction of total capex needed in the sector • Regional power PPI needed for size, access to hydro power, and power trading – but even more difficult to do (never been done) • Changes needed in govt attitudes, capacity, and enabling environments to facilitate more PPPs • More grant funding needed for project preparation • Minimum $300 million needed now for 3-year pilot facility – just for power

  25. Thank you

More Related