Public-Private Partnership Stories Guinea: Electricité de Guinée Guinean’s national power utility, Electricité de Guinée (EDG), is responsible for provid- ing power generation, transmission, and distribution services across the country. How- ever, electricity distribution under EDG suffers from weak governance, old infrastruc- ture, poor maintenance of assets, frequent blackouts, high electricity theft rates and losses, poor billing and collection rates, and overall poor financial performance. To help address this, the Government of Guinea hired IFC as the lead advisor to structure a performance-based public-private partnership (PPP) for EDG. The consortium Veolia-Seureca won the bid for a 4 year performance-based manage- ment contract, and the PPP agreement was signed in June 2014 despite significant challenges posed by the Ebola epidemic, which was at its peak during this time. The private operator will provide EDG with experienced staff to oversee operations, experts to bring complementary expertise to specific projects, such as IT systems, and much needed improvements in EDG’s operational performance. Veolia and EDG staff will work closely together to achieve the key performance indicators that have been set in the contract. It is expected that the improved services, for nearly 300,000 house- holds by the end of the contract, will increase the quality and reliability of power services in Guinea. This series provides an overview of public-private partnership stories in various infrastructure sectors, The project was implemented with the financial support of DevCo, a multi-donor facility affiliated with the where IFC was the lead advisor. Private Infrastructure Development Group. DevCo provides critical financial support for important infra- IFC Advisory Services in structure transactions in the poorest countries, helping boost economic growth and combat poverty. DevCo Public-Private Partnerships is funded by the UK’s Department for International Development (DFID), the Austrian Development 2121 Pennsylvania Ave. NW Agency, the Dutch Ministry of Foreign Affairs, the Swedish International Development Agency, and IFC. Washington D.C. 20433 ifc.org/ppp BACKGROUND funding to Guinea’s Energy Sector Recovery Plan. Specifically, IFC Guinea’s population of 11.45 million inhabitants (2012) is served assisted the government in designing the management contract by one electricity distribution utility, EDG, although its reach is and attracting and selecting a strong and reliable operator for limited beyond Conakry and some secondary cities. The urban EDG through a transparent and competitive tender process in the electricity distribution sector is in a dire state. While Guinea context of an unprecedented Ebola epidemic has excellent potential for hydro power generation (6,000 MW) access to electricity is very low: 17% in urban areas and 3% in TRANSACTION STRUCTURE rural areas. Energy production for Conakry is about 130 MW IFC proposed a transaction structure based on a four-year while demand is estimated to be 240 MW (WB, 2011), which performance based management contract using a prescriptive leads to large scale load shedding. Generation, transmission, approach in determining the obligations of the private operator. and distribution infrastructure are dilapidated due to lack of Under the management contract, the private operator payment is investment and maintenance. EDG is hampered by high losses, based on (i) a fixed fee for 7 expatriate managers, (ii) the delivery poor billing and collection rates, and overall poor financial and of seven specific missions that require short-term expertise managerial performance. Tariffs are also not at cost recovery implemented over the first two years and (iii) a performance levels. The poor performance of EDG is reflected in its inability based payment based on key performance indicators (KPIs). to manage the system properly and efficiently, carry out the The three KPIs which trigger the performance based payment investment requirements needed to meet demand and foster are: 1) metering ratio for existing customers, 2) improvement further economic growth and development in the country, in collection ratesfor billed private consumers and 3) reduction and present the market with a credible off-taker for future of specific fuel consumption for thermal plants. An important Independent Power Producers (IPPs). part of the contract structure was to ensure that the private In 2012, a $1.3 billion Energy Sector Recovery Plan which partner’s obligations and key performance indicators were includes the introduction of a 3-5 year management contract backed by funding for the required capital investments. This for EDG was established. The Government of Guinea’s strategy, approach provided comfort to the government regarding specific supported by its development partners, includes opening the investments to be undertaken by the private partner, and it also electricity distribution sector to private sector participation provided comfort to bidders that the cost of the management in order to transform EDG into a viable commercial entity. contract, and related investments, were secured in advance. Given the poor situation of EDG, financial restructuring and a management contract structure were determined to be the optimal BIDDING interim solution to improve and expand services. This could After a transparent and competitive bidding process, eventually pave the way for a concession scheme which involves VeoliaSeureca consortium was selected as the preferred bidder greater risk transfer to the private sector and allows EDG to in November 2014 and was awarded the management contract emerge as a credible off-taker for IPPs in the long-term. after negotiations with the Government. Despite the challenging environment in Guinea and the Ebola epidemic, the management IFC’S ROLE contract was signed on June 19, 2015 and VeoliaSeureca took over In January 2014, IFC was engaged as the transaction advisor to EDG operation in September 2015. The four-year performance the Government of Guinea to advise the Ministry of Energy and based management contract has a total value of EUR11.3 million. Hydraulics on the structuring and implementation of a PPP for EDG. As there was a lack of market appetite for a fully private option, the decision was made to implement a 4 year performance EXPECTED POST-TENDER RESULTS based management contract with the objective of improving the • Organizational restructuring of EDG including operational and financial performance of EDG. the comprehensive training of staff. The cost of the management contract for EDG was funded by the • Improvement of EDG’s technical, commercial World Bank under the Power Sector Recovery Project (PSRP), and financial performance. the $50 million IDA grant/credit to improve the technical and commercial performance of the national power utility. • Improved electricity services to over 300,000 The funding includes the management contract fees, capital households. expenditure in the energy sector, and technical assistance to the 03/2016 Ministry of Energy and Hydraulics. The PSRP was part of the broader development partner support to Guinea under its national Energy Sector Recovery Plan. The Project benefitted from close coordination with 10 donors who committed $790 million of