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The Ghana & Tanzania Power Sectors:

Opportunities & Challenges

Presentation to Distributed Wind

Energy Association

Washington, DC

February 13, 2013

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Agenda

I. Overview of USAID Approaches and Assets for Power

Sector Reform

II. Partnership for Growth: Overview

III. Partnership for Growth: Ghana

IV. Opportunities & Challenges in the Ghana Power Sector

V. Partnership for Growth: Tanzania

VI. Opportunities & Challenges in the Tanzania Power

Sector

VII. Discussion & Wrap-Up

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Energy is a Critical Success Factor

Energy supports multiple development objectives

• Energy for Economic Growth

• Key constraint, e.g., PFG Ghana and Tanzania

• Key competitive factor

• Failing energy sectors have large impacts in Afghanistan, Kosovo, Pakistan,

Tajikistan, Kyrgyzstan, etc.

• Energy is a key input to agriculture, education, and health

The Bulk of USAID’s Energy Program now focuses on Interagency

Priorities

• At the frontline of Diplomacy, Defense, Development:

• Since 2007 support for CPC’s and Haiti has grown; energy reconstruction

is by far the largest component of USAID’s energy programming

• Global Climate Change

Energy Security is a key strategic concern for US Dept. of State’s new

Energy Resources Bureau 3

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USAID FY 2012 Energy Spending

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Energy Spending by Country/Region/Bureau

Pakistan - $150 Million

Afghanistan - $229 Million

Haiti - $12.74

Liberia - $11.5

E3 -

$24.1 Africa

- $20

Total: $511 Million

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Fixing Troubled Utilities

Our objective is to “turn-

around” deeply troubled

national electricity utilities,

stop huge revenue and

energy losses, and expand

coverage

Government of Haiti Payments to Electricity Sector

US $ Millions 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06

Transfers to

electricity sector $8 $9 $15 $27 $42 $36

Total Gov of Haiti

expenditures $216 $267 $374 $397 $580 $480

% of budget 4% 3% 4% 7% 7% 8%

DABM Gross Profit

(250.0)

(200.0)

(150.0)

(100.0)

(50.0)

-

2007 2008 2009 2010 2011 2012 2013 2014 2015

Mil

lio

n U

SD

Base CaseICE Secretariat and AEIC

Afghanistan: Increasing Losses

Projected

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A Proven Theory of Change

Sector Reform for Large Networked Utilities

Technology & Management

Innovation

Better Service Broader

Coverage Sustainability Clean Energy Lower Cost

National & Regional

Infrastructure Businesses

Investment

Utilities that do their job!!

Donor & Partner Roles Intermediate Result End Result

Grid or Off-grid, the underlying dynamic is that of a sustainable

energy business.

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1. Based on Strategic Analysis

- Analysis of Trends & Strategic Opportunities

- Private Sector and Donor Partners

- Develop Policy Options jointly with Host Country public and private sectors

2. Support for Sector Reform

- Regulatory capacity

- Corporatization & good corporate governance

- Management contracts, concessions & privatization

3. Commercialization

- Customer enumeration and needs analysis

- Marketing, distribution and business plans

- Innovations - B2B, mobile, metering, finance

4. Capital Development

- Foundation: a flexible but strategically-driven plan

- Attract private participation when possible

- Host country contracting when possible

- Invest in critical systems, such as SCADA, MIS/ERP, metering, CIS, and Billing Systems

5. Evaluation

- Rigorous evaluations - Analyze interim results and adjust - Identify and train USAID/USG staff on best practices

6. Hand off To Host Country

- Use on-budget and host country contracting

- Establish agreements that require sustainability

A Proven New Approach

In the new approach to energy, USAID focuses on changes needed to make

investments sustainable

- Our focus will be standing

up a utility that can pay its

bills, sustain services, and

build new infrastructure

- Decentralized services

complement the larger grid

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Kabul Electricity Services Improvement

Program Results

$56,936,170

$81,659,574

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

Fiscal Year 2009 Fiscal Year 2010

50%

37%

0%

10%

20%

30%

40%

50%

60%

Fiscal Year 2009 Fiscal Year 2010

Aggregate Technical & Commercial Losses in Kabul

43% Revenue Increase in

First Full Year

Reduction of total

electricity losses by

26%

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Example: Kabul Electricity Sector Improvement Program

(KESIP) Revenue Protection Initiative

Clamp-on Ammeters to identify theft and

unregistered connections

PDA Smart Phone for data capture and transmission

50,000 optical port digital meters

USAID electricity sector reform programs apply innovative

technologies on a large scale

Innovative Technology

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• DABS can track supply and losses to zones & feeders

• Scheduled load shedding improves quality of service

• Voltage stability improves

Example: Substation & Junction Station Grid Metering

SCADA meter

Fiber Optic

Communications Accurate Metering of

High Voltage Panel

Original

meter

New

meter

Application of Innovative SCADA Technology in Kabul

Innovative Technology

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Innovative Technology

Part of “eBreshna” initiative; user-friendly customer interface for billing, payment

and service issues over mobile phone. Includes partnership between DABS, local

telco operator (Etisalat) and two local banks (Pashtany Bank and Azizi Bank) that

accept payments for DABS service.

• Delivers customer bill by SMS

• Increases number of bill

payment points

• Eliminates human data entry

errors

• Provides fast and accurate

electronic reconciliation of

bank and DABS payment

records

• Maximizes DABS revenue by

ensuring timely delivery of

accurate bills

Cell Phone Based Billing and Account Management in Kandahar

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Partnership for Growth (PFG) Overview

• The Partnership for Growth is a White House initiative with

four countries: Philippines, El Salvador, Ghana, and Tanzania.

• In 2011, the USG, in partnership with each government,

carried out a Constraints Analysis to identify “binding

constraints” on economic growth.

• Power was identified as a top constraint in Ghana (also

Credit) and Tanzania (also Rural Roads).

• In 2012, the USG negotiated Joint Country Action Plans

(JCAP) with each partner government.

• Implementation of the JCAPs for Ghana and Tanzania is to be

formally started shortly; some activities are already underway.

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PFG Ghana

The JCAP for Power in Ghana is focused on 5 areas of

action:

1) Strategy and Planning

2) Institutional, Regulatory, and Structural Reform

3) Electricity Demand and Generation Capacity

4) Transmission and Distribution Infrastructure and Operations

5) Rural Access

The USG will bring inter-agency resources to bear, including

USAID, MCC, USTDA, DOS, DOE, DOC, EXIM, and OPIC

The USG will assist in attracting private investors to Ghana

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Ghana: West Africa Overview

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Ghana: Key Information

• Political Leadership: President John Mahama (ascended at death of

President Mills, then elected in December to new term)

• Elections: Held December 7, 2012

• Population: 24.6 Million

• GDP: $37.16 Billion (2011)

• GDP Real Growth Rate: 13.6% (2011); Target 9.4% (2012)

• Budget: $10.38 Billion (2011)

• Central Bank Reserves: $4 Billion, fell 20% in 2012 (Gold, Cocoa, and Oil

are major sources of hard currency)

• Bank of Ghana Policy Rate: 15%

• Inflation Rate: 9.5%

• 5-Year GOG Bond: 26%

• 2-Year Fixed Rate Note/Savings Account: 23%

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Ghana: Power Sector Overview

The state-owned Ghana power sector has been separated into Generation, Transmission, and Distribution:

Volta River Authority (VRA) is the principal generator, with 1,040 MW of hydropower capacity and interests in 700 MW of thermal generation

Grid Company of Ghana (GRIDCO) (formerly part of VRA) owns and operates the transmission system

Electricity Company of Ghana (ECG) is the main distribution company, with 2.4 million customers

Northern Electricity Distribution Company (NEDCO) (owned 100% by VRA) serves central and northern Ghana, with 400,000 customers

The Public Utilities Regulatory Commission (PURC) regulates electricity and gas.

As the owner of VRA, GRIDCO, ECG, and NEDCO (through VRA), the GOG exerts significant influence through CEO/MD and BOD appointments, but also derives benefits in the form of unpaid electricity bills and VAT revenue. GOG’s Ministries, Departments, and Agencies (MDAs) make up 25% of ECG’s billed revenue (and a similar proportion of NEDCO’s billed revenue) and the account is over 18 months in arrears, totaling 428 Million Ghana Cedis (approximately $225 Million at current exchange rates).

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Ghana: Interconnected Transmission

System

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Ghana: Current Situation

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Ghana’s distribution system is in

a serious state: • Reported collections, as low as 88%

• GOG delays payment, accounts for

25% of ECG and NEDCO revenue

• Technical and non-technical losses

as high as 28.8% and rising

• Aggregate Technical, Commercial, &

Collections Losses for ECG are

43.48% and for NEDCO are

38.91%.

• 150 MW load shedding, ongoing

• 1,485 MW available with peak

demand of 1,748 (2011)

• Poor customer service (connection

delays, metering delays, payment

difficulties)

• De-capitalization of the system.

• Mismatched Revenue & Expenses:

Foreign currency exposure

accelerating downward slide

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International References

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But this situation, although severe, is not unprecedented internationally…

AES EP ESKOM UEDC AMPLA DESCO

Non-Technical

Losses Before 98% 60% 70% 100% 47%

Non-Technical

Losses After 1% 3-5% 4% 1-2% 9.6%

Examples of

Approaches

Used

• Commercial

process

redesign

• Revenue

protection

• New

business

processes

• Plastic meter

encasement

• AMR

• Service drop

with coaxial

cables

• Commercial

process

redesign

• Revenue

protection

• AMR-

InfoPOD

• Aerial

bundled &

coaxial

cables

• Feeder level

balancing

• Commercial

process

redesign

• Revenue

protection

• Communal

metering

• Feeder and

transformer

level

balancing

• HR reform

• Internal

control

systems

• Commercial

process

redesign

• Revenue

protection

• Transverse

aerial

distribution

• Placement of

LV over MV

lines

• AMR

• Commercial

process

redesign

• Revenue

protection

• Service drop

with ABC &

secure

cable

connections

• Prepayment

meters

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Ghana: Gas Infrastructure

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Ghana: Thermal Generation in Operation

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Operating Thermal Generation:

1) Takoradi T1 (VRA) - 330 MW CC (State-owned (VRA))

2) Takoradi TICO T2 IPP (VRA/TAQA) – 220 MW. This plant will be completed by

a CC project of 110 MW, which USAID’s AIP is currently supporting. Financial

closure of the addition expected within 6 weeks. Need for Gas T1 + T2 = 123

MMscfd (contract with N-Gas through WAGP, which USAID supported).

3) Sunon Asogli IPP (Chinese-owned) – 200 MW CC in Tema – Need for gas:

30MMscfd

4) CENIT IPP – 126 MW in Tema. Ex- GECAD project taken over by Ghana

pension and insurance fund. Looking for an operator. Need for gas 30MMscfd

5) VRA Tema - 126 MW built by GECAD – State Owned – Need for gas 30

MMscfd. CENIT and VRA Tema can be coupled for a steam addition of 125 MW.

6) Ghana Mining Companies - 80 MW in Tema – Built up from used equipment,

HFO, unlikely to be ever using gas.

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Ghana: Thermal Generation in Development

Thermal Generation in Development:

1) Cenpower Kpone IPP (KIPP) 350 MW CC in Tema, which USAID is supporting through AIP. PPA and GCSA signed, sent to Parliament. Next step is for Cenpower/Infraco/AFC to introduce a new equity partner and negotiate with lenders. Need for gas 55MMscfd

2) VRA Domunli, 450 MW. A “Power Zone” will be created at Domunli, west of Ghana, not too far from the Jubilee gas treatment plant. VRA may ultimately be looking for a private partner, but the information we have now is that this project is considered state-owned. Need for gas 70 MW

3) WAPP Domunli, also in the Power Zone. 450 MW. AIP is contemplating support, in continuity of USAID/AFR past assistance. Need for gas 70 MMscfd

4) Sunon-Asogli Expansion – 200 MW CC. Apparently not moving on due to lack of gas. Need for gas 30 MMscfd

5) VRA Takoradi T3- 300 MW – Currently in development, state-owned. Need for gas 50 MMscfd.

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Ghana: Medium & Large Hydropower

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Ghana: Clean Energy Opportunities

Ghana presents numerous opportunities in clean/renewable energy: Hydropower: The Ghanaian and regional system is hydropower-based; GOG is

favorably disposed to development of remaining sites (e.g. Juale).

Wind: 150 MW offshore wind project has been looked at by GE and Vestas; could be well-integrated with VRA’s hydropower generation (locate east of Accra, near to Akosombo).

Solar: VRA is constructing 10 MW (2 MW at 5 sites) in northern Ghana.

The World Bank is assisting PURC in development of feed-in tariffs for renewable energy, including hydropower to 100 MW

Main focus of USG is on clean energy development as well as reduction in flared natural gas associated with oil production

USAID is a long-term supporter of the West African Power Pool (WAPP), to promote regional electricity trade and development.

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Distribution Reform: The Imperative

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Distribution reform is a

precondition for sustainability

of the power sector…

Generation and transmission

cannot achieve efficiency within a

poorly functioning distribution

sector.

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• Change service drops, metering & billing

• Enumerate and regularize customers

• Incentivize employees

The recovery cycle

Fact: When the UEDC was reformed, it

used the same amount of electricity pre-

and post- reform even though power

supply increased from 0-6 hours per day

to 24 hours per day.

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International References

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Several examples demonstrate important insight into the reform

process… both what can be achieved, as well as what should be

avoided…

Country Approach

Oman Unbundling, under state ownership

Jordan Privatization by divestiture

Morocco Long-term concessions

India, Bhawindi Private franchise

Georgia (UEDC) Management contract, followed by divestiture

Georgia (Telasi) Divestiture failure

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Interventions (ECG & NEDCO)

o Institutional Reform – State Company Best Practices/IPO of 15-20%

of shares in 3-5 years

o HR/Change Management/Training/Position Descriptions &

Salaries/Promotions

o Modern IT Platform/MIS/Enterprise Resource Planning(ERP)

o CIS/Billing System/GIS/Customer Enumeration

o Commercial Improvements/Meter Reading/Anti-Theft Campaign

o Technical Loss Reduction – Feeder Replacement, Congested Area

Strategies

o Cost of Service - Rates & Revenue Department

o Corporate Communications/Consumer Services/Marketing

o DSM/Load Management/Distribution-level SCADA

o Finance/Internal Audit

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PFG Tanzania

The JCAP for Power in Tanzania is focused on the following six

measures:

1) Establish Cost-Reflective Tariff Structure

2) Minimize Revenue Loss

3) Strengthen Legal and Regulatory Institutions

4) Improve Sector Planning

5) Increase Key Sector Institutional Capacities

6) Promote Private Investment in Power

The USG will bring inter-agency resources to bear, including

USAID, MCC, USTDA, DOS, DOE, DOC, EXIM, and OPIC

The USG will assist in attracting private investors to Tanzania

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Tanzania: East Africa Overview

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Tanzania: Key Information

• Political Leadership: President Jakaya Kikwete (Note: Zanzibar has its own

President for internal matters)

• Elections: Held in October 2010

• Population: 46.9 Million

• GDP: $23.33 Billion (2011)

• GDP Real Growth Rate: 6.7% (2011)

• Budget: $6.125 Billion (2011)

• Central Bank Reserves: $4 Billion (Tourism, Gold, and Coffee are major

sources of hard currency)

• Bank of Tanzania Policy Rate: 12%

• Inflation Rate: 12.7% (2011)

• 5-Year GOT Bond: 14.8%

• 2-Year Fixed Rate Note/Savings Account: 11.6%

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Tanzania: Power Sector Overview

The state-owned Tanzania power sector concentrates Generation, Transmission, and Distribution in a single hand:

TANESCO is the principal generator, with a mix of hydropower capacity (560 MW) and thermal generation (300 MW+ with own generation and IPPs under Emergency Power Plan; Songas is largest and oldest IPP)

TANESCO owns and operates the transmission system, but is dependent on multilateral development banks and donors for expansion of the transmission system

TANESCO is the main distribution company, with 700,000 customers (12% coverage); ZECO distributes power on Zanzibar. TANESCO’s technical and commercial losses approximate 24%.

The Rural Energy Agency (REA) (funded by 3% surcharge on electricity bills) is responsible for grid expansion and off-grid projects serving isolated communities

The Energy and Water Utilities Regulatory Authority (EWURA) regulates electricity.

As the owner of TANESCO, the GOT exerts significant influence through MD and BOD appointments, but also derives benefits in the form of unpaid electricity bills and VAT revenue.

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Tanzania: Clean Energy Opportunities

Tanzania presents numerous opportunities in clean/renewable energy:

Hydropower: The Tanzanian and regional system is hydropower-based; GOT is favorably disposed to development of remaining sites (e.g. Stiegler’s Gorge).

Wind: Offshore wind opportunities exist off of Zanzibar.

Solar: Resource exists, but resource assessment and feed-in tariffs are needed.

Geothermal: Resource exists, but at very early stage of development.

Biomass: Resource exists (Bagasse); not yet developed.

The World Bank, African Development Bank, JICA, SIDA, Norway, and KfW, among others, are active in the Tanzanian power sector

Main focus of USG is on clean energy development as well as assistance to GOT to develop its offshore natural gas reserves

USAID is a long-term supporter of the East African Power Pool (EAPP) and the Southern African Power Pool (SAPP), to promote regional electricity trade and development.

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Contact Information

USAID/EEE/EI/Energy Team

Contact: Dorian Mead

Email: dmead@usaid.gov

Email 2: dmead@afr-sd.org

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