Gsvw=; gw, '.ebgW; ;> n;< ;*A 100 kW output) modem diesel 0.284 I/kWh (36%). Average efficiency of low speed, base load diesel (Pacific region) 030-033 lkWh (28-32% eff). Energy Measurements Area: 1.0 km2 ' 100 hectares = 0.386 mi2 1.0 acre = 0.41 hectares Mass: 1.0 long tons = 1.016 tonnes Energy I kWh 3.6 MJ = 860 kcal - 3412 Btu - 0.086 kgoe 1 toe = 11.83 MWh 42.6 GJ = 10 million kcal - 39.68 million Btu 1 MJ = 238.8 kcal = 947.8 Btu 0.024 kgoe = 0.28 kWh Notes:(1) Average yield of 2.93 air dry tonnes residues/tonne copra produced (Average NCV 14.0 MJ/kg) nwwb = moisture content wet basis. NCV = net calorific value. (2) Proportion: kernel 33%, shell 23%, husk 44% by dry weight. (3) Assumes converson efficiency of 9% (biomass-fuelled boiler). EXECUTIVE SUMKARY 1. Fiji is a large Pacific Island economy, with a land area of 18,272 km2, a population of about 725,000, and a per capita income of about US$1,700. Most of the population and economic activity is concentrated on two large islands-- Viti Levu and Vanua Levu. Fiji is a diversified middle-income country which has an internationally competitive sugar industry, a significant industrial base, well-developed tourism, and good prospects for further development of forests, fisheries, and agriculture. In the early 1970s, Fiji experienced a strong economic performance, but from the mid-1970s, growth slowed and became erratic. There was very little growth in 1980-85, a decline in 1987, with recovery in 1989. Fiji can improve its economic performance in the 1990s by adopting cautious fiscal and monetary policies, possible exchange-rate adjustments, reducing distortions and deregulating economic activity.l/ 2. The major energy-related agencies are the Department of Energy (DOE) within the Ministry of Civil Aviation, Tourism and Energy, the Public Works Department (PWD), and the Prices and Incomes Board (PIB). DOE is solely responsible for national energy policies, energy conservation and renewable energy implementation, and shares responsibility for rural electrification with the Fiji Electricity Authority (FEA) and PWD. DOE is also responsible for issues related to petroleum and electricity supply, particularly tariff structures and proposals for major capital investment. DOE provides advisory services to FEA, and advises GOF on petroleum supply. The PIB regulates the wholesale and retail prices of petroleum products. Petroleum Subsector 3. Fiji imports all of its petroleum in the form of finished products, with the market shared by three international oil companies. LPG (butane) is imported and distributed by two other companies. This supply arrangement is efficient and the effective landed cost allowed by PIB is reasonable. 4. Fiji's consumption of petroleum products grew at 2.2Z over 1985-90, with a decline in 1987. The major inland products are ADO, motor spirit, and IDO. Kerosene is primarily used for household lighting and cooking. Total Fiji consumption is projected to increase at a rate of 3.7X per annum over 1990-2000, while inland consumption alone is projected to increase at 4.82 per annum. FinaDeco 5. Fiji has recently established the Fiji National Petroleum Company (Finapeco) to replace the international oil companies in order to (i) bring onshore to Fiji some of the present offshore trading profits, (ii) put the control of petroleum supply in indigenous Fijian hands, and (iii) possibly in the longer term, engage in refining in Fiji. In late 1991, Finapeco is scheduled to become the exclusive petroleum product supplier. Finapeco will arrange with 1/ For a discussion of Fiji's economic situation and prospects, see Toward Higher Growth in Pacific Island Economies: Lessons from the 19808, World Bank Report No. 9059-ASIA, January, 1991. - ii - retronas, Malaysia for the purchase/supply of 10,000 bbl/day of crude, and with Esso (Singapore) for the processing of 10,000 bbl/day of crude, and the supply, including freight, of appropriate refined petroleum products to meet Fijian requirements. 6. The establishment of Finapeco with a monopoly on the import of oil will have adverse economic and financial imolications for Fiji, as well as for the neighboring countries that are linked to Fiji through the existing petroleum supply network. Further, Finapeco's establishment is not consistent with the GOF's broader development objectives, such as reducing the role of the state and increasing the level of nompetition in the economy. 7. The incremental economic and financial costs oL Finapeco to Fiji are estimated to be about F$1.6 million (US$1.1 million) and F$4.3 million (US$3.1 million) per year, respectively. The sources of these incremental costs are (i) Finapeco's higher FOB cost of product, (ii) Finapeco's higher marine freight cost, (iii) Finapeco's higher onshore margin, (iv) Finapeco's higher overhead charge, and (v) Finapeco's letter of credit and interest costs. In contrast, Finapeco's benefits are unclear. Finapeco is unlikely to improve product quality, security of supply, or the extent of indigenous Fijian control over the supply of fuel. 8. Finapeco is an additional burden on GOF in terms of incremental costs to the consumer, diversion of scarce managerial capacity, and additional commercial risks. In addition, there is a risk that in the long-term Finapeco's monopoly status will lead to a gradual loss of efficiency and a reduced responsiveness to customer needs. 9. In order to avoid the incremental costs as well as the long-term risks, it is recommended that the GOF should wind down Finapeco as soon as possible, before additional costs are incurred.2/ Such a decision would also benefit neighboring countries that are linked to Fiji through the existing petroleum supply network. Petroleum Prices 10. The PIB's price regulatory framework has kept petroleum prices at reasonable levels, but it has some deficiencies. First, the system lacks transparency, clarity, regularity and standardization. Second, there is no provision for regular standardized submissions of company cost data for adjustment of internal distribution factors in the price buildup. Third, the PIB Secretariat's expertise in the area of international product supply, pricing and affreightment is not well-developed. 11. A two-phase approach to price reform is recommended. First, the above deficiencies in the PIB's system should be eliminated, with technical assistance from specialized experts. Later, once the improved system has been functioning for some years, there should be complete price deregulation, accompanied by effective regulation in non-price areas such as weights and measures, facilities design and inspection, safety, quality control, etc. 2/ In August 1992, the GOF announced its decision to shut down Finapeco. - iii - Electricity Subsector 12. FEA, a wholly Government-owned statutory authority, is responsible for the generation, transmission and distribution of electrical power in Fiji; at present, FEA supplies electricity on Viti Levu, Vanua Levu, and Ovalau. At the end of 1990, FEA had 72,500 consumers, classified as domestic (86%), commercial and industrial (12X), and others (2%). FEA is the most advanced power utility in the Pacific islands region. 13. In 1990, FEA had sales of 369 GWh, with the bulk 942) of the sales coming from the hydro-based Viti Levu Interconnected System (VLIS). FEA also operates isolated diesel systems et Rakiraki (on Viti Levu), Labasa and Savusavu (on Vanua Levu), and Levuka (on Ovalaa). Over 1985-90, overall FEA sales increased at an average annual rate of 5.31, with a decline in 1987; sales of the isolated systems generally increased more rapidly, starting from an initial low base. 14. Commercial and industrial consumers accounted for nearly 80% (277.4 GWh) of total 1990 VLIS sales, with the largest consumer, Emperor Gold Mines (EGM), alone accounting for 61.5 GWh, which is almost 181 of the total. The Fiji Sugar Corp (FSC) is a large captive power producer that also buys and sells electricity to FEA. FSC supply is important at Labasa and Rakiraki, but on the VLIS, FEA has not purchased significant amounts of energy from FSC since 1986. 15. Load Forecast: VLIS sales are projected to increase, in the base case, at a rate of 3.3% a year to 2000, with the low and high growth rates being 2.8% and 3.9Z, respectively. The bulk of the increase in sales is projected to come from commercial customers. For the isolated systems, Rakiraki sales are projected to increase at 4.9Z, Labasa sales at 6%, Savusavu sales 4.92, and Levuka sales at 5.1% per annum. 16. Transmission and distribution losses on the FEA system range from 9.2% in Labasa to 6.2Z in Levuka. These losses can be gradually be reduced, particularly on the 11 kV and low voltage distribution systems. To reduce the losses, it is recommended that FEA review its present design criteria for the distribution systems. To further reduce losses on all plant, transformers, and lines in an economical manner, it is recommended that FEA ra-se the power factor to 0.9, effective after a grace period of, say, three years. 17. The reliability of supply criteria is critical in determining the VLIS expansion plan. FEA's reliability of supply criteria require sufficient diesel generating capacity, both on the eastern and western sides of the main island, to meet at least 851 of peak demand in the event of transmission line failure. While the risks of transmission line failure are real, in order to eliminate the costs associated with FEA's reliability criteria, it is recommended that FEA formulate a relaxed reliability of supply criteria, and study alternative approaches for achieving it. 18. PEA's expansion Plan: FEA will be able to meet the increasing electricity requirements in its existing supply areas, with moderate scope for expansion, with an investment program averaging F$6.2 million (in constant 1990 F$) per year over the 1991-2000 period (see Table 3.6). There may be no need for capacity expansion for the VLIS, though the isolated systems will need additional - iv - capacity. If PEA's reliability of supply criteria are relaxed, there will be adequate SsneratinS capacity to meet the projected VLIS load until the early 20009. Hence, the expansion plan does not call for any plant additions; however, if the larger diesel units are not capable of baseload operation for lengthy, periods, then it will be necessary to consider the addition of a large diesel unit, or an equivalent hydro development. Repairs to the foundation of one of the diesel units, and the transfer of an out-of-service MW diesel unit from Suva to Kinoya will add 6 MW of capacity to the system at relatively small cost. 19. Other Investment: Although there is some technical justification for PEA's planned subtransmission and distribution expenditures for ILIS for the period to 2000, FEA may not be able to afford them, given its precarious financial condition. Hence, it is recommended that FEA review these and other prospective investments closely in the next few years in light of its evolving financial situation. 20. Monasavu capacitv: There are indications that the firm and average reservoir capacity of the Monasavu scheme may exceed the current estimates. A proposed study will assess the firm and average capability of the reservoir, on the basis of newly available data. It is recommended that the first phase of this study start as soon as possible, and that the second phase of the study include the development of a reservoir operating rule curve. 21. It is recommended FEA exploit the cogeneration potential of a number of industrial operations, particularly FSC, which is the largest potential cogenerator. It is recommended that FEA aggressively pursue the possibility of power purchases from FSC at Lautoka for the VLIS. 22. Isolated systems expansion Rlans: The recommended development plans for the isolated systems include: for Rakiraki, the installation of two 365 kW diesel units in 1991, the retirement of one 365 kW unit at that time, and the installation of another 365 kW unit in 1997 or 1998; for Labasa, the transfer of three 1.14 MW units to the new station during the next three years, and the installation of an additional 1.6 MW unit in 1993 and 1997; and for Levuka, additional 365 kW units in 1992 and 1993. PEA may have to curtail its planned subtransmission, distribution and rural electrification reinforcements and extensions because of its financial difficulties. 23. Electricity Tariffs: It is recommended that electricity tariffs be based on the marginal costs of electricity supply, which have been recently developed in an ADB funded study. This will imply a substantial restructuring of the electricity tariff. The across-the-board 10 tariff increase instituted in August, 1991 did not restructure the tariff. Strengthening FEA 24. FEA's financial position is now considerably worse than it was in 1989, and FEA lacks a working capital base. Hence, it is recommended that PEA be strengthened by establishing an effective cash and debt management program. 25. Financial Recommendations: Even with domestic debt restructuring and a freeze on capital expenditures in 1991, provided that working capital is kept at a two-month level, PEA will be short of funds in 1991. In order to prevent FEA - v - from incurring further overdrafts and short-term debt and allow FEA to rebuild its equity base, it is recommended that (i) GOF inject fresh equity of at least F$15 million in 1991, (ii) FEA's promissory notes be converted into longer term debt by floating FEA bonds, (iii) the average tariff be increased by 6.5%, effective immediately (over and above the 10Z increase instituted in August, 1991), followed by 10% nominal in..reases in 1992, 1993, and 1994, and (iv) GOF provide the funds to finance any capital expenditures, but insist that tariffs be high enough to attain an 8% rate of return on the revalued rate base. 26. It is recommended FEA continue to remain fully accountable for the management of corporate funds and its service operations. However, FEA should apply tight financial controls, and the FEA annual budget should not include additional short-term borrowing or bank overdrafts. Further, FEA management should adopt a closely monitored rolling cash flow plan, with clear priorities for expenditures for each functional group. 27. In order to enable FEA to formulate its strategies with adequate lead time, it is recommended that FEA pursue multi-year plans, including a three-year indicative budget, which will give direction to and complement the rolling cash flow plan. This planning will require additional staff in FEA's system planning and development department. 28. Two changes are needed in FEA's accounting practices to bring them into line with normal accounting practices. The first change relates tc the effect of devaluations on FEA's assets, while the other change relates to the depreciation rate charged on assets. Further, it is recommended that a comprehensive physical and cost appraisal of FEA's assets be made, and that results be used as the basis for restoring the appropriate value of equity and future depreciation charges. It is also recommended that FEA adopt asset revaluation as an accounting policy. Rural Electrification 29. iiji's rural electrification system has become increasingly strained because (i) FEA has reached the economic limit of grid extensions for rural districts, and (ii) the number of stand-alone projects to be installed and administered by PWD and DOE has expanded well beyond the ability of either organization to administer and maintain. 30. The costs of rural electrification are a significant burden. At present, rural electrification requires a subsidy estimated to be over F$1 million per year. This subsidy will be substantially higher if proper operation and maintenance capability is not present, as is the case with the proposed projects. 31. At present, there are proposals for two major st,ai-alone rural electrification projects with a total investment of F$8.21 million (Lakeba, Gau, Koro, Moala and Rotuma) in stand-alone diesel systems, and F$3.5 million (Taveuni) for stand-alone hydro. In order to ensure that the rural electrification investment programs are economically and socially justified, it is recommended that the proposals for the expansion of rural electrification be re-evaluated. - vi - 32. If it is decided to pursue these projects, then a specialist agency must be developed to take care of the technical and administrative operations of all stand-alone rural electrification schemes. Hence, it is recommended that a Rural Electrification Authority he created, preferably using the PWD rural electrification group as a core. This Authority would design, install and manage these new projects as well as accepting all existing stand-alone rural electrification projects under its management umbrella. Renewable Enerev Solar 33. Solar energy is widely used in urban areas for water heating, and there does not appear to be a market beyond domestic and light commercial water heating. The market is developed and increasing well, and no government attention is recommended. 34. Ir. addition, there are household solar lighting systems, remote village solar radio-telephones, inter-island solar HF communication links, and a number of solar buoy and lighthouse installations. While the communications and marine marker systems appear to be working well, the domestic lighting systems have a high failure rate because of inadequate maintenance. The systems thus far have been designed, installed and maintained oy DOE, which does not have the proper organization or manpower. 35. Nationally broadcast television, which is likely in the near future, is expected to create a strong demand for rural electrification. Fiji commercial interests and DOE are presently evaluating solar powered TV and video systems for use in the remote areas. 36. Photovoltaic applications will be particularly useful in the more remote islands, for which the data are not being collected at present. Hence, it is recommended that the DOE, in coordination with the Fiji Meteorological Service and the Forum Secretariat Energy Division, select additional remote sites for solar radiation data collection and seek donor assistance for implementation. 37. Though the market pressures may be strong for electrification through solar photovoltaics, the support for rural solar power is weak. Unless an organization is created with an adequate technical and administrat've capability for solar based rural electrification, the past failure of 5015. photovoltaic projects will be repeated. The proposed Rural Electrification Authority could have this responsibility. Biomass 38. The largest fuel quality biomass resource is waste from the processing of sugar cane, cocoa, coconut and rice, of which bagasse (from sugar cane) is the largest quantity. Bag2sse has been used for many years to fire sugar mill boilers for process heat, and the Labasa and Rakiraki mill also produces cogenerated electricity. The efficiency of the use of bagasse for process heat and electricity production can be improved by capital investment in storage facilities at Labasa and in more efficient boilers, additional generating equipment and bagasse storage at the Lautoka and Rakiraki sites. These - vii - investments would be economically attractive provided FEA were to purchase electricity at a rate comparable to its diesel production costs. In view of the benefits to YEA from purchasing cogenerated electricity, it is recommended that FEA provide further incentives for expanded bagasae-based electricity production on Viti Levu and Vanua Levu. 39. The husks and shells that are the by-products of the copra industry ar3 mainly used to dry copra. On large scale plantations, it is possible to generate electricity as a by-product of the drying process. 40. Fiji's forestry and mill waste from the harvesting and processing of pine and plantation hardwoods is also a significant biomass energy resource. While large-scale projects based on the harvesting and processing of indigenous hardwoods are uneconomical, small-scale use for plant process heat and, in some cases, steam-based electrical generation to service the processing facility may be practical. Such uses should be incorporated on a project by project basis. In order to use this p tential resource, it is recommended that DOE develop a program for technical and financial assistance, in association with donors, to encourage appropriate development of small-scale biomass utilization at indigenous hardwood processing sites. 41. The production of lumber and other products based on pine plantation trees presently results in over 30,000 MT of fuel quality biomass waste each year, and production increases are forecast through the next decade. Since this resource is concentrated at three sites, it can be used for energy purposes. While significant amounts of this waste are already being utilized for process heat and sawmill power, if PEA were to price its purchases at the equivalent of its avoided cost, this would provide the appropriate incentives for investment in electrical productioni for provision to the grid. 42. Except in the core urban areas, there is no evidence of "nuseholCs having difficulty in obtaining fuelwood, though in Azme areas conveni access to household fuels may become difficult within the next ten yearf . In the future, large scale forestry programs may be able to provide continuing convenient access to fuelwood. 43. The staff of the Forestry Department is insufficient to fully enforce the forestry laws and regulations, so that violators are not always 'eaught, and nor are those caught always prosecuted. In order to ensure that forestry rules are observed, it is recommended that the strength of the Forestry Department be increased. Hvdro 44. In the near term, hydro power has the greatest potential for renewable energy development. There are over 70 sites that have hydroelectric potential ranging from 50 kW to several megawatts, of which about ten sites appear to have economic promise. There are also over 15 sites with hydroelectric potentials below 50 kW, of which no more than five sites appear to have economic promise. These identified sites require additional investigation, particularly stream monitoring and general hydrological data collection, before the decision to develop is made. Since Fiji's hydro resources are being identified and - viii - investigated in an adequate and timely manner, no change in the existing programs is recommended. 4'. Wind Dower. teothermal energv. OTEC. and wave enerty: Since these sources of energy are still experimental, particularly in the Pacific Islands environment, it is recommended that no major investments be undertaken, but, in order to permit future development, Xfiw-cost data collection be undertaken. I. THE ECONOMIC AND INSTITUTIONAL CONTEXT Energy and the Economy 1.1 Among the Pacific Island economies, Fiji stands out in terms of its size and levels of economic and social development. With a land area of 18,272 kM2 , Fiji's population was estimated to be 725,000 in 1990, with a per capita income of approximately US$1,700. Fiji has about 300 islands, but most of the population and economic activity is concentrated on two large islands - Viti Levu and Vanua Levu. In overall economic terms, Fiji is a diversified middle-income country which has an internationally competitive sugar industry, a significant industrial base, well-developed tourism, and good prospects for further development of forests, fisheries, and agriculture. 1.2 In the early 1970s, Fiji experienced a strong economic performance, but from the mid-1970s, growth slowed and became erratic. In the period 1980-85, there was very little increase in real GDP. The economic situation deteriorated after the military coup in May, 1987. However, the economy quickly stabilized at reduced levels of activity, revived in 1989, and the 1990 growth rate in nominal GDP was estimated to be 4%. In 1989, Fiji's balance of payments showed a current account deficit which was approximately 3Z of the GDP. The import of petroleum products was approximately 16% of total imports and approximately 28% of merchandise exports. Selected economic indicators are shown in the Statistical Appendix, Table 1. 1.3 In the early 1980s, Fiji constructed the Monasavu hydroelectric project. As a result, there was a sharp reduction in the quantity of imported diesel needed for thermal generation of electricity. 1.4 Fiji's economic performance in the 1990s can be much better than that achieved in 1980s. This improvement will require full recovery of private investment, based on major changes in economic policies. The basic need is for a macroeconomic policy framework conducive to further development. This framework call for cautious fiscal and monetary policies, and possible exchange- rate adjustments. Further, economic efficiency should be promoted by reducing distortions and deregulating economic activity.l/ Institutional Framework Government of Fili 1.5 Fiji's major energy-related agencies are the Department of Energy (DOE) within the Ministry of Civil Aviation, Tourism and Energy, the Public Works Department (PWD), and the Prices and Incomes Board (PIB). DOE has direct responsibility for national energy policies, energy conservation and renewable energy implementation. DOE shares responsibility for rural electrification with the Fiji Electricity Authority (FEA) and PWD, with FEA providing rural grid extensions, PWD providing rural village diesel generation, and DOE providing 1/ For a discussion of Fiji's economic situation and prospects, see Toward Higher Growth in Pacific Island Economies: Lessons from the 1980s, World Bank Report No. 9059-ASIA, January 1991. micro hydro, small steam and solar photovoltaic (PV) power to rural communities. DOE is also responsible for issues related to petroleum and electricity supply, particularly tariff structures and proposals for major capital investment. DOE provides advisory services to FEA, and advises GOF on petroleum supply and mining. The PIE regulates the retail prices of gasoline, kerosene, and automotive diesel oil (ADO), which are formally under the jurisdiction of the Ministry of Finance. Power Subsector 1.6 FEA is a wholly Government-owned statutory authority, established under the Electricity Act of 1966 from the merger of three local utilities. FEA is responsible for the generation, transmission and distribution of electrical power in Fiji. At present, FEA supplies electricity on Viti Levu, Vanua Levu, and Ovalau. 1.7 FEA, a well managed organization, is the most advanced power utility in the Pacific Islands region. FEA operates its power systems with a high level of service reliability, and has excellent facilities for the repair and maintenance of electrical and electronic equipment and for the calibration of meters. It has good training facilities, with an active training and apprenticeship program. Petroleum Subsector 1.8 Fiji has no known indigenous petroleum resources and imports all of its present inland and bunker consumption in the form of finished products. The procurement, storage and distribution of liquid products is shared by affiliates of three multinational companies--BP, Mobil and Shell, whose market shares in 1990 were 25%, 29%, and 46%, respectively. 1.9 Petroleum products have been traditionally supplied in medium-range (MR) tankers through the companies' affiliate network from refineries in Australia, New Zealand and Singapore to their marine terminals in Fiji. Each company owns and operates terminals in both Vuda (near Nadi) and Suva; in addition, Mobil leases two tanks at Vatia (owned by Emperor Gold Mines) and owns a small terminal at Labasa (on Vanua Levu). Shell has a throughput arrangement with Mobil at the Labasa depot. 1.10 Most of the road haulage of petroleum products to retail outlets is by independent companies, although these independent truckers receive financial backing from the petroleum companies and bear the company logos on the trucks. There are also independent jobbers with their own fleet of small trucks, who deliver petroleum products to small outlets and bulk purchasers. There are a total of 72 company petroleum outlets in Fiji--69 on Viti Levu, 3 on Vanua Levu. 1.11 LPG (butane) is imported and distributed by two companies--Fijigas and Bluegas. Fijigas, owned 51Z by Boral, Australia and 49% by 27 local shareholders, dominates the Fiji market with approximately 952 of the volume. Fijigas imports its LPG from Australia. Small pressurized tankers in the 1,300 metric ton (MT) range drop part cargoes at marine terminals in Suva, Lautoka and Labasa. Bluegas, jointly owned by the Punja Group (452), Elf (25Z), Total (25%) and Fiji Development Bank (5Z), commenced operations only in 1989 and is building up its market. Bluegas has one terminal at Vuda Point into which small parcels of LPG are offloaded from small tankers. 1.12 The LPG terminals include cylinder-filling and bulk truck-loading facilities on-site. There is also a small Fijigas cylinder-filling depot at Sigatoka, with 4 NT of storage capacity. The most common distribution mode is in 13 kg cylinders for domestic use. There are larger cylinders, up to 50 kg for larger domestic or commercial use, as well as bulk distribution via road tankers. Fiii National Petroleum Company (FINAPECO) 1.13 Finapeco was established by a cabinet order on November 13, 1990. It has been registered as a limited company, with an approved capital of F$6 million. While its formal mandate and objectives are not known precisely, interviews with the GOF and company officials indicate that the objectives are to: (a) To bring onshore to Fiji some of the present offshore trading profits and activities of product procurement and freight transport. (b) To put the control of petroleum supply in indigenous Fijian hands. (c) Possibly longer term, to engage in refining in Fiji. 1.14 The initial operating plans of Finapeco are to manage, under an exclusive license, replacing BP, Mobil, and Shell, the entire petroleum product procurement and affreightment for Fiji. By late 1991, Finapeco is scheduled to take control of .he product supply function, providing petroleum products into the marine receiving depots of the three existing distributors. There are no immediate plans for Finapeco to own or operate any of the product receiving, storage and distribution infrastructure of Fiji. II. ENERGY CONSUMPTION Petroleum Products 2.1 In 1990, total petroleum consumption, both inland and bunkers, was 377,000 kl, up from 337,000 kl in 1985, for an annual growth rate of 2.2Z over the period. The consumption of all products suffered a decline in 1987 as a result of the aconomic impact of two military coups, but recovered to pre-coup levels by 1989, and continued increasing in 1990, buoyed by rapid GDP growth. Excluding products in international trade, the 1990 inland consumption at 252,000 kl has increased at a faster rate than overall consumption, at approximately 3.3% per annum over 1985-90. These growth rates compare with average real GDP growth of about 4Z per annum over this period. As a guide to recent sectoral end-use, Table 2.1 provides a breakdown of inland consumption for 1990, while Annex 1 provides a summary of petroleum product consumption over the past six years. Table 2.1: SECTORAL BREAKDOWN, INLAND CONSUMPTION OF PETROLEUM PRODUCTS, 1990 (kl) Domestic Trans- Commer- Indus- Public Non- TOTAL port cial trial Power Energy Gener. LPG 8,209 0 1,437 1,437 0 0 11,082 Avgas 0 1,795 0 0 0 0 1,795 Motor Spirit 0 62,183 0 0 0 0 62,183 Solvent 3,231 0 0 0 0 0 3,231 Kerosene 21,551 0 0 0 0 0 21,551 ADO /a 0 93,056 0 13,294 0 0 106,350 IDO /a 0 0 0 26,424 7,361 0 33,785 IFO 0 0 0 6,556 0 0 6,556 Lubes 0 0 0 0 0 5,234 5,234 TOTAL 32.991 157.034 1.437 47.710 7.361 5.234 251,767 /a All of the IDO and a portion of the ADO consumed in the Industrial sector is used in private power generation. Source: Mission estimates. 2.2 Among the major inland products, automotive diesel oil (ADO) has shown a growth rate of 4.0% per annum over 1985-90. ADO is used predominantly for transportation with private power generation accounting for less than 10% of total consumption. The consumption of motor spirit, all in transportation, has increased at a slower rate, approximately 2% per annum over 1985-90. Most of the growth in industrial diesel oil (IDO) consumption, approximately 5.8% per annum over 1985-90, is due to increased use by FEA; the general industrial use has not changed significantly over 1985-90. As indicated by the sectoral breakdown for 1990, all of the industrial use is for in-house power generation. The other industrial fuel is IFO, which at a consumption of approximately 6,500 kl per year is a minor product in the energy balance. Its consumption fluctuates in response to factors related to activity in two or three key industries such as cement, sugar and brewing. 2.3 Kerosene is primarily used for household lighting and cooking applications. Growth at 4.1Z per annum has been unusually strong over 1985-90 when compared to other developing countries of similar economic rank, where kerosene consumption for rural lighting and some cooking typically increases less than 12 per annum. (Table 2.1 and Annex 1). Since the volume of consumption in Fiji is small, the explanation may lie in a small "leakage" into other applications and/or a misA-classification of market disposition. 2.4 The other household fuels are "solvent", a white gasoline used primarily in mantle-type lamps and ironing in rural areas, and LPG. While solvent consumption is minor and declining, LPG is incre&sing at a rate of approximately 102 per annum. 2.5 As in most small countries with some international aviation and bunker business, there is no clear trend in the consumption of jet fuel or in diesel and fuel oil bunkers for marine use, because these uses depend heavily on regional traffic patterns and relative pricing, which can vary widely and are often beyond the control of the host country. There is rarely any close relationship between the consumption of these products and growth in the economy. Demand Forecast 2.6 The forecast to the year 2000 of petroleum product consumption is shown in Table 2.2. On the assumption that the real GDP will increase at 4.0% per annum over 1990-2000, total consumption is projected to increase from 377 thousand kl in 1990 to approximately 540 thousand kl by the year 2000, at an average growth rate of 3.72 per annum over 1990-2000. The corresponding average growth rate for inland consumption alone is 4.8% per annum. 2.7 It is estimated that the growth rate of automotive driving activity will be approximately equal to the real GDP growth rate. It is expected that gasoline-driven vehicles will become more efficient over 1990-2000, i.e., the average km/l will increase, by 9%. This results in a 3.02 per annum growth in motor spirit use. It is expected that there will be no net efficiency gains for the ADO-fuelled vehicles, and ADO consumption growth is projected to increase at the same rate as real GDP. Table 2.2: SUMMARY FORECAST OF PETROLEUM PRODUCTS CONSUMPTION Forecast 1990-2000 1990 1995 2000 per annum (actual) INLAND --------------------------MT----------------------- LPG 10.0% 6,372 10,262 16,527 ---------------- kl------------ LPG 10.0% 11,082 17,847 28,743 Avgas 4.0Z 1,795 2,184 2,657 Motor Spirit 3.0% 62,183 72,087 83,569 Solvent 0.0% 3,231 3,231 3,231 Kerosene 1.0% 21,551 22,650 23,806 ADO 4.0% 106,350 129,391 157,424 IDO (to FEA) 22.7% 7,361 31,313 57,148 IDO (to Industry) 1.0% 26,424 27,772 29,188 IDO (Total) 9.8% 33.785 59.085 86.337 IFO 2.0% 6,556 7,238 7,992 Lubes 4.0% 5,234 6,368 7,748 TOTAL INLAND 4.8% 251.767 320.082 401.506 INTNL AV & BUNKERS Jet Al 0.0% 97,116 97,116 97,116 ADO 4.0% 12,539 15,256 18,561 IDO 4.0% 6,310 7,677 9,340 IFO 4.0% 8,927 10,861 13,214 TOTAL AV/BUN 1.0_ 124.892 130.910 138.231 TOTAL FIJI 3.7Z 376.659 450.991 539.737 Source: Annex 2. 2.8 Sales of IDO to industry are prcjected to continue to increase at the historical rate of 1.0Z per annum. The sales of IFO to industry are forecast to increase at 2.0 per annum, slightly lower than the 2.4Z experienced over 1985- 90. Kerosene consumption is forecast to increase at 1.0% per annum. The use of solvent is projected to remain at the current level. The consumption of LPG is projected to continue to increase rapidly, at an average growth rate of 10Z per annum, as households gradually shift from kerosene to LPG for cooking. The - 7 - resultant LPG consumption of 16,500 MT per year by the year 2000 would imply that roughly 50% of the households would use LPG as the prime cooking fuel. 2.9 Given the difficulty of forecasting the use of petroleum products in international aviation and bunkers, it was assumed that jet fuel consumption will remain flat at 1990 levels through the forecast period, and the diesel/fuel oil use in bunkers will increase at a 4.0X per annum rate, matching real GDP growth. The specialty products, avgas and lubricants, are projected to increase at 4.0Z per annum, which is equal to the GDP growth rate but slightly lower than the historical growth rate. Electricity 2.10 In 1990, the Fiji Electricity Authority (FEA) had sales of 369 GWh, with the bulk (approximately 941) of the sales coming from the hydro-based Viti Levu Interconnected System (VLIS), a grid system which serves the principal towns and many villages on the main island of Viti Levu. FEA also operates isolated diesel systems at Rakiraki (on Viti Levu), Labasa and Savusavu (on Vanua Levu), and Levuka (on Ovalau). Of FEA's 72,500 consumers in 1990, nearly 86% were residential, 12% were commercial/industrial, and 2% were other consumers. 2.11 From 1985 to 1990, overall FEA sales increased at an average annual rate of 5.3Z (Table 2.3), with a decline in 1987, following the coups, and then recovered. For the same period, VLIS sales increased at 5.1% a year, while sales of the isolated systems generally increased more rapidly, starting from an initial low base. Table 2.3: FEA HISTORICAL ELECTRICAL SALES (GWh) Av. annual System 1985 1986 1987 1988 1989 1990 growth (x) Viti Levu 270.0 296.0 293.0 304.0 324.0 347.0 5.1 Rakiraki 1.6 1.7 2.0 2.0 2.0 2.2 7.5 Labasa 11.2 11.29 11.50 11.86 12.84 13.74 4.2 Savusavu 1.2 1.8 1.8 2.0 2.2 2.5 16.9 Levuka 1.0 1.0 2.4 3.4 3.6 3.8 31.6 Total 284.9 311.8 310.7 323.3 344.8 368.9 5.3 Source: FEA. 2.12 Commercial and industrial consumers accounted for nearly 80% (277.4 GWh) of total 1990 VLIS sales, with the largest consumer, Emperor Gold Mines (EGM), alone accounting for 61.5 GWh, which is almost 18% of the total. FEA sells electricity to EGM at a concessional rate 2/ in order to utilize excess energy available from the Monasavu hydropower development, but it is expected that excess hydropower will soon no longer be available, probably in 1991/92. Residential consumers (65.0 GWh) accounted for nearly 19Z of 1990 VLIS sales, and street lighting and institutions for the rest. 2.13 The Fiji Sugar Corp (FSC) is a large captive power producer that also buys from and sells electricity to FEA. FSC supply is important at Labasa and Rakiraki, but on the VLIS, FEA has not purchased significant amounts of energy from FSC since 1986. 2.14 Over 1985-90, the electricity sales in Rakiraki increased at 7.5% per annum, mainly from the extension of the system into the more rural surrounding areas, while the sales to FSC, the largest consumer with 26% of total 1990 Rakiraki sales, have remained essentially constant. The average annual growth rate of Labasa sales was 4.2Z per annum; the major consumers are FSC (122 of Labasa 1990 sales) and Fiji Forest Industries. Savusavu sales increased at 16.9Z per annum; the Government-owned copra mill is the largest consumer, accounting for 46Z of total Savusavu sales. Levuka sales increased at 31.6% per annum, mainly from the growth of Pacific Fisheries Co. (PAFCO) operations, with PAFCO accounting for 60% of Levuka 1990 sales. PAFCO is currently expanding and upgrading its production facilities, which are scheduled to be in full operation by 1992. Load Forecast - VLIS 2.15 FEA's sales forecasts for the VLIS are based upon an econometric model that forecasts energy sales based on assumptions for gross domestic product (GDP), population, and the price of electricity. This model is appropriate for use in the planning of future developments. The forecast assumes that sales to EGN will remain fixed at 60 GWh over 1991-2000, even though it will lose its concessional rate soon. In order to arrive at projections uf gross generation and peak demand, the sales forecasts have to be adjusted for system losses and load factor for each year. A slightly optimistic assumption has been made that system losses, including station use, will remain constant at 9%, close to the 1990 level of 8.6%. The load factor has been assumed to remain essentially constant at 64Z, close to the 1990 level of 63.7%. 2.16 The base case projections, used for development planning purposes, assume a 4% average annual GDP growth rate to 2000, while the low and high projections assume 3% and 5Z GDP growth rates, respectively. In the base case, VLIS electricity sales increase at an annual average rate of 3.3% a year to the planning horizon of 2000, with the low and high growth rates being 2.8% and 3.9Z, respectively. The difference between base case forecasts and the high and low forecasts is small (Table 2.4). 2/ The rate for interruptible supply to EGN was raised from F09.0/kWh to F011.5/kWh, effective August, 1991. - 9 - Table 2.4: PROJECTED SALES, GENERATION AND PEAR DEMAND FOR THE VLIS Sales Generation Peak Demand High Base Low High Base Low High Base Low -_______________ (GWh) ---------------- ------ (MW) ------ 1990 (Actual) - 346.6 - - 383.9 - - 67.3 - 1995 412.3 401.8 391.5 453.4 441.5 430.2 80.7 78.6 70.6 2000 502.4 476.1 451.2 552.1 523.2 495.8 98.3 93.1 88.3 Av. annual growth (Z) 3.9% 3.3% 2.8% 3.9% 3.3% 2.8% 3.8Z 3.2% 2.7Z (1990-2000) Source: FEA; Annex 3. 2.17 The bulk of the projected increase in sales will come from commercial customers, including new developments such as a number of hotels (particularly in the Western Region), new office/shop complexes (particularly in the Suva area) and several industrial/manufacturing projects throughout Viti Levu, as well as from existing customers. Residential sales are expected to increase at a slower rate in the future than in the past, owing to a slowing down of consumption growth from existing customers, after an initial boost associated with new appliances, and an increasing proportion of new connections being in recently electrified rural areas, with their lower average consumption. Load Forecast - Isolated Systems 2.18 Based on discussions with FEA staff, information obtained from major consumers, and a review of the sales ;rowth over the period 1977-89, FEA's forecasts of growth in demand on the other systems appear reasonable. A summary of the projections is shown in Table 2.5. 2.19 Over the period 1991-2000, Rakiraki sales are projected to increase at 4.9%, which is considerably less than the 14% annual growth experienced in the 1980s. The main reason is that sales to FSC, the largest consumer, are likely to remain constant during the period. Labasa sales are projected to increase at an annual average rate of 6% per annum. On the Labasa system, the 11 kV circuit (which can be upgraded to 33 kV when the load requirements increase) has been extended by 23 km to Seaqaqa township. Another project will add more than 1,600 residential consumers during the next three years in Labasa and neighboring areas. Consequently, residential and commercial load is expected to increase at a slightly higher rate than in the past. The load of the largest consumer, FSC, is forecast to remain constant during the period. 2.20 Savusavu sales are projected to increase at an annual average rate of 4.9% per year until 2000. Considerable activity is expected in the SPvusavu area in the period under consideration. The Government has designated the area as a development center, and a new wharf and other infrastructure projects are planned. The largest consumer, the copra mill, is understood to be expanding its - 10 - facilities with a consequent increase in electrical load. An 11 kV line from the small run-of-river hydro project at Wainiqeu to Savusavu will likely result in further consumer connections. Levuka sales are projected to increase at an annual average rate of 5.1% a year until 2000. The Levuka system has been experiencing strong growth since 1987 as a result of the activities of PAFCO. The expansion of the PAFCO facilities will be completed in 1993 when full production is expected. PAFCO operations are expected to have a positive effect on the whole area. The growth overall is expected to be higher until 1993, and is projected to decline a little in the later years to 2000. The peak demand forecast for Levuka is based upon an improved load factor, due largely to the PAFCO operation. Table 2.5: PROJECTED SALES, GENERATION AND PEAK DEMAND FOR THE ISOLATED SYSTEMS Year 1990 1995 2000 (Actual) Rakiraki Sales (MWh) 2,266 2,895 3,657 Peak Demand (MW) 0.563 0.82 1.03 Av. annual sales growth (Z) (1990-2000) 4.9 Labasa Sales (MWh) 13,735 18,415 24,680 Peak Demand (MW) 3.47 4.9 6.6 Av. annual sales growth (x) (1990-2000) 6.0 Savusavu Sales (MWh) 2,545 3,243 4,115 Av. annual sales growth (2) (1990-2000) 4.9 Levuka Sales (MWh) 3,763 5,822 6,166 Av. annual sales growth (2) (1990-2000) 5.1 Source: FEA. Renewable Energy Solar 2.21 Solar energy is widely used in urban areas for water heating, but there does not appear to be a market beyond domestic and light commercial water heating. The market is developed and increasing well, and no government attention is recommended. 2.22 DOE has installed solar electricity in over 300 houses, and local vendors have privately installed another solar systems on another 200-300 houses. - 11 - Additionally, there are nearly 200 remote village solar radio-telephones, and several higher power inter-island solar HF communication links. A number of solar buoy and lighthouse installations are supported by the Marine Department. 2.23 While the communications and marine marker systems appear to be working well, the domestic lighting systems have a high failure rate. This is due partly to systems being too small for the user's needs and partly due to inadequate maintenance. The systems thus far have been designed, installed and maintained by DOE staff, and DOE does not have the proper organization or manpower to adequately as large a number of systems as have been installed. Biomass 2.24 Fuelwood. There is no organized market for fuelwood in Fiji. Except in the core urban areas, there is no evidence of households having difficulty in ob.aining fuelwood, though in some areas convenient access to household fuels may become difficult within the next ten years. The Forestry Department's pilot program to develop a community forest project has been progressing favorably; in the future, large scale forestry programs may be able to provide continuing convenient access to fuelvood. 2.25 In the urban areas, fuelwood use is largely for special events, when meals are cooked in traditional underground ovens ("lovos"), since most urban families usually cook with kerosene or LPG. Fuelwood can be purchased in small bundles from a few stores or in larger quantities from sawmills. Licenses to produce domestic firewood are issued by the Forestry Department. This Department's 1989 report shows that approximately 18,500 m3 of stacked firewood was produced under license, equivalent to less than 0.2 m3 per Fiji household per year, which is not considered significant. 2.26 Copra. As by-products of the copra industry, in 1989, Fiji produced approximately 38 thousand MT of husk and shell, most of which was used to dry copra. Individual or small cooperative copra producers usually dry copra in metal drums that require the use of virtually all the husk and shells produced. Larger plantations use large scale drying methods that allow, as in the case of the Tarte plantation at Vuna, Taveuni, the production of electricity sufficient for the plantation as a by-product of the drying process. The system uses steam for copra drying and a 40 kW alternator driven by a reciprocating steam engine for electricity production. A small (10 kW) steam based dryer and electricity production unit has not been an economic success, at least partly due to the expense of bringing the bulky husks and shells to the dryer site. 2.27 Bazasse. At present, bagasse is the largest agricultural waste product. FSC has been using a large percentage of the bagasse produced as an energy source for process steam and electricity production. In 1989, FSC used approximately I million MT of bagasse in this manner. - 12 - III. ENERGY SUPPLY Petroleum Products Present Arrangements 3.1 Three suppliers, BP, Mobil, and Shell, currently import petroleum products under inter-affiliate supply arrangements, from Australia, New Zealand and Singapore. To economize on freight and inventory carrying charges, the companies engage in joint cargo arrangements on medium-range (MR) vessels. Australia has been the predominant source, with just over 502 of the market, with the remainder shared roughly equally by New Zealand and Singapore. 3.2 Regardless of the source of the petroleum product, the landed costs for the oil companies consist (i) an FOB component based on 50% of their affiliated refinery's Singapore posting and 50% Singapore spot price, (ii) a freight component based on MR Average Freight Rate Assessment (AFRA) Worldscale from Singapore, and (iii) freight-related factors such as in-transit losses and cargo insurance. The freight movement is usually a minimum of two port discharges (Vuda and Suva) and often three or four (e.g., additional drops at Vatia or Labasa). 3.3 The Prices and Incomes Board (PIB), Fiji's price establishment and adjustment body, allows a final selling price that reflects a landed cost based on (i) 502 Singapore spot price and 502 of the lowest of the three Singapore postings, and (ii) marine freight charges, at MR AFRA Worldscale with a 15% premium, based on the two-port discharge. This premium is an allowance for "clean" vessels and "remote trading", since the AFRA rate generally reflects charter rates for dirty vessels in active markets where there may be opportunities for back-hauls or triangulation. 3.4 The present supply arrangement, and the landed cost as allowed by PIZ, is an efficient system in the context of Fiji's petroleum demand, scale factors and geography. While the cost factors allowed by the PIB appear to be low ir. relation to costs of supply from Singapore, the companies' benefit by importing approximately 75% of the product from shorter-haul sources (Australia and New Zealand), and not from remote Singapore, even though the PIB formula assumes that all of the products will be imported from Singapore. The fact that the companies have been functioning under the PIB system for some years suggests that the PIB's approach is acceptable to the oil companies. Proposed New Finapeco Arranaement 3.5 In late 1991, Finapeco is scheduled to take exclusive control of the petroleum product supply function. This takeover and subsequent operation will be implemented through two supply arrangements: (a) Finapeco has arranged with Petronas, Malaysia for the purchase/supply of 10,000 bbl/day of crude at the Official Selling Price (OSP); (b) Finapeco has arranged with Esso (Singapore) for the processing of 10,000 bbl/day of crude, and the supply, including freight, of - 13 - appropriate products to meet Fijian requirements. This crude processing/product supply arrangement follows a call for tenders to four companies - BP, Esso, Mobil and Shell - with Esso judged to have provided the best offer. 3.6 The establishment of Finapeco as a new enterprise with a monopoly on the import of oil is a matter of serious concern. This concern arises from the economic and financial implications for Fiji of the new supply arrangements, the lack of consistency with the GOr's broader development objectives, such as reducing the role of the state and increasing the level of competition in the economy, and the implications for neighboring countries, which are linked to Fiji through the existing petroleum supply network. Economic and financial implications for Fili 3.7 The functioning of Finapeco will result in additional economic and financial costs to Fiji, compared to the existing supply arrangements. These incremental economic and financial costs are difficult to calculate precisely because of the fluctuations in international petroleum products and freight markets. However, a simulation of the pre-Gulf War year (August, 1989 - July, 1990), which is taken as a representative "normal" year, can provide a reasonable estimate of the likely costs. Based on this simulation, the incremental economic cost to Fiji is estimated to be about F$1.6 million (US$1.1 million) per year, and the incremental financial cost to Fiji to be about F$4.3 million (US$3.1 million) per year, which is equivalent to about F¢2/liter (Tables 3.1 and 3.2). 3.8 The actual economic and financial costs of the new arrangements may be different from the estimated values because of future changes in international petroleum and freight markets. However, the sources of these additional costs will remain relevant even when such changes take place. - 14 - Table 3.1. INCREMENTAL ECONOMIC COSTS OF FINAPECO ARRANGEMENTS L A. Incremental Economic Costs Associated with Gasoline. Kerosene, and ADO Gasoline Kerosene ADO Total/ Average 1. Unit Incremental Costs (US$/bbl) FOB Cost of Petroleum Produ:t 0.11 0.14 -0.03 0.03 FOB Cost of Reduced Discount for Leaded Gasoline 1.58 0.00 0.00 0.52 Marine Freight Cost 0.30 0.33 0.34 0.33 Total CIF Incremental Cost 2.00 0.47 0.31 0.88 2. Product Volumes (MB/year) 377.4 134.0 641.6 1,153.0 3. Increme.atal Costs /a US$'OOOs 753.9 62.9 197.2 1,013.6 F$ 'Ofos 1,047.3 87.5 274.1 1,409.0 B. Incremental Economic Costs Associated with Other Products /b 1. Unit Incremental Marine Freight Cost (US$/bbl) 0.33 2. Product Volumes (MB/year) 315 3. Incremental Costs /c US$'000s 102.9 F$ '000. 143.0 C. Total Incremental Economic Costs US$'000s 1,116.5 F$ '000. 1,552.0 Fe/liter 0.67 /a Compared to the CIF costs under the present arrangement, as allowed by the PIB. The analysis is based on a simulation of the historical year August, 1989 through July, 1990. The values may not add up due to rounding. lb The only cost increment for these products is for the marine freight charges, which is assumed to be the same as the average marine freight increment for gasoline, kerosene, ADO. Jet Al and bunkers are excluded because they are entrep8t items, and have no economic cost associated with them. /c Incremental Costs - Unit Incremental Costs*Product Volumes. Source: Mission estimates. - 15 - 3.9 For the major 'uels, the estimate of the incremental economic cost is F$1.4 million (US$1.0 million) per year, which is derived from a comparison of the PIB's current allowance for the CIF cost of landed products with the terms of Finapeco'e contract with Esso (Table 3.1). The elements of this comparison ares (a) Incremental FOB cost of product. Under both the current PIB formula and the proposed Finapeco terms, 50% of the FOB cost of the product is based on the Singapore spot price. However, under the current PIB formula, the remaining 50% of the price is based on the lowest of four Singapore postings, while under the proposed Finapeco terms, the remaining 50% will be based on the average of four Singapore postings. This cost differential means that Finapeco's costs would have been higher by approximately F$0.06 million (US$0.04 million) per year than under the current system. (b) Reduced discount for leaded gasoline. Finapeco will purchase leaded gasoline at a discount of US$2.20/bbl from the price of low-lead gasoline. This discount is less than that obtainable under the current PIB formula, which uses the greatest discount offered (estimated to be US$3.78/bbl). This cost differential means that Finapeco's costs would have been higher by approximately F$0.83 million (US$0.60 million) per year than under the current system. Thus, Finapeco's FOB cost for the major fuels, which is the sum of items (1) and (2) above, would have been higher by approximately F$0.89 million (US$0.64 million) per year than the cost under the current system. (c) Incremental marine freiaht cost. Under both the current PIB formula and the proposed Finapeco terms, the marine freight costs will be based on MR AFRA Worldscale with a premium for clean vessels and/or remote trading. However, under the current PIB formula, the premium is 15%, which is less than the premium of 58 points of Worldscale under the proposed Finapeco terms. Because of this difference, Finapeco's marine freight cost would have been higher by approximately F$0.53 million (US$0.38 million) per year than the cost under the current system. 3.10 In addition to the estimated incremental economic cost of F$1.4 million for the major fuels, on a pro-rata basis, the incremental marine freight costs associated with other petroleum products would have been F$0.14 million (US$0.01 million) per year (US$0.33/bbl). - 16 - Table 3.2: INCREMENTAL FINANCIAL COSTS OF FINAPECO ARRANGEMENTS /a A. Incremental Financial Costs Associated with Gasoline. Kerosene, and ADO Gasoline Kerosene ADO Total/ Average 1. Unit Incremental Costs (US$/bbl) FOB Cost of Petroleum Product 0.48 0.72 0.57 0.56 FOB Cost of Reduced Discount for Leaded Gasoline 1.58 0.00 0.00 0.52 Marine Freight Cost 0.30 0.33 0.34 0.33 Total CIF Incremental Cost 2.36 1.05 0.92 1.40 Finapeco Overhead charge 0.50 0.50 0.50 0.50 Total Unit Incremental Cost 2.86 1.55 1.42 1.90 2. Product Volumes (MB/year) 377.4 134.0 641.6 1,153.0 3. Incremental Costs /c US$'OOOs 1,078.1 207.5 908.4 2,194.1 F$ '0008 1,498.6 288.4 1,262.7 3,049.8 B. Incremental Financial Costs Associated with Other Products /b 1. Total Unit Incremental Cost (US$/bbl) 1.39 2. Product Volumes (MB/year) 315 3. Incremental Costs le US$'000. F$ '0008 608.6 C. Incremental Financial Costs Associated with Financing /d US$'000s 500.0 F$ '000. 695.0 D. Total Incremental Financial Costs US$'000s 3,132.0 F$ '000s 4,353.5 F¢/liter 1.86 /a Compared to the CIF costs under the present arrangement, as allowed by the PIB, based on a simulation of the historical year August, 1989 through July, 1990. The values may not add up due to rounding. /b The cost increment for these products are for FOB cost of petroleum ($0.56), marine freight cost ($0.33), and the Finapeco overhead charge ($0.50), based on the estimated for gasoline, kerosene, and ADO. Jet Al and bunkers are excluded because they are entrepOt items. /c Incremental Costs - Unit Incremental Costs*Product Volumes. id Associated with the letter of credit needed to finance the purchase of crude. Source: Mission estimates. - 17 - 3.11 The incremental financial cost to Fiji consists of the incremental economic costs discussed above and additional distribution and overhead costs (Table 3.2). The elements of these additional costs are: (a) Incremental onshore margin. Finapeco has proposed to base its sale price to the distribution companies on the average of four Singapore postings, while under the current PIB formula, the sale price is based 50Z on the Singapore spot price and 502 on the lowest Singapore posting. The difference amounts to approximately F$1.73 million (US$1.24 million) per year. (b) Incremental overhead charge. In order to cover its administrative costs, Finapeco has proposed to add a US$0.50/bbl overhead charge to its CIF price, while such administrative charges are not allowed in the current PIB formula. The additional cost amounts to approximately Fs1.02 million (US$0.73 million) per year. (c) Letter of credit and interest costs. Finapeco will need to finance its purchase of crude oil, and it will need to raise a letter of credit and pay interest on a working capital overdraft. This cost is estimated to be F$0.7 million (US$0.5 million) per year. This cost has been assumed by the GOF on behalf of Finapeco. 3.12 As these additional expenditures are incremental to those considered under the current PIB formula to determine the allowable price of fuels, they represent incremental financial costs to Fiji consumers of Finapeco's proposed operations. In addition, as these costs would be incurred before Finapeco sells the fuel to cnshore distribution companies, it would not be feasible nor appropriate to compensate for these costs through an equivalent F$0.02/liter reduction in the PIB's existing allowance for the oil companies' local distribution expenses, as has been proposed by Finapeco. 3.13 While the incremental costs of Finapeco to Fiji are evident and quantifiable, the incremental benefits are unclear. A comparison of the existing supply network with the new Finapeco arrangement with Esso provides little grounds for expecting a difference in product quality, security of supply, or the extent of indigenous Fijian control over the supply of fuel. In general, product quality should not be a matter of concern, as all the major international oil companies (IOC) can supply the same quality of product as Finapeco, in response to market requirements. On the issue of security of supply, the current supply network with the three major IOCs in the region has possibly a higher degree of reliability than reliance on a single supplier. The perception of greater national control with Finapeco is also likely to be limited by the fact that Fiji will continue to have to rely on petroleum product imports for a long time, as the size of the domestic market and its strategic location render it uneconomical to consider refinery operations even in the long term. 3.14 On this basis, it is concluded that the GOF has taken on an additional burden in terms of incremental costs to the consumer, diversion of scarce managerial capacity, and additional commercial risks. In addition, as with any monopoly, there is a risk that in the long-term an exclusive import license will lead to a gradual loss of efficiency, and a reduced responsiveness to customer needs. - 18 - 3.15 It is recemmended that, in order to avoid the incremental costs as well as the long-term risks, the GOF should wine. down Finapeco as soon as possible, before additional costs are incurred.3/ Such a decision would also benefit neighboring countries who are linked to Fiji through the existing petroleum supply network of the international oil companies, and who are facing the choice of paying the incremental cost of Finapeco or seeking alternative supply arrangements at a cost that is likely to be higher than that of the existing supply network. Electricity Present Power System 3.16 The Fiji Electric Authority (FEA) operates five power systems in Fiji (See Map). The Viti Levu Interconnected System (VLIS) consists of the Wailoa Hydroelectric Station at the Monasavu reservoir and five diesel generating stations (Table 3.3). The isolated Rakiraki system on Viti Levu has about 1 MW of installed capacity. At Labasa, on Vanua Levu, FEA is now constructing a new diesel power station, and installing diesel units transferred from Lautoka; the large units in the old Labasa station will be transferred to the new station during the next three years and the old station will cease operations. During the sugar cane crushing season (typically June to December), the Rakiraki and Labasa systems purchase energy produced in FSC's bagasse fired steam generating plants, which are operated on a baseload basis. The Savusavu system, on Vanua Levu, is supplied from a diesel station. An 800 kW run-of-river hydro plant, now under construction at Wainiqeu, will be interconnected with the Savusavu diesel plant by an 11 kV line in 1992. The Levuka system, on Ovalau, is based on a diesel station located in town, and supplies a largely urban area. 3.17 Transmission and distribution losses on the FEA system range from 9.2X in Labasa to 6.21 in Levuka (Table 3.4). While this level of losses is generally satisfactory, they might gradually be reduced, particularly on the 11 kV and low voltage distribution systems. To reduce the losses, it is recommended that FEA review its present design criteria for the distribution systems, and carry out relevant system analysis to ascertain if its present design practice is technically and economically appropriate. The system power factor on the VLIS is between 0.8 and 0.85. FEA is forcing its larger commercial consumers to meet the regulatory requirement that their power factor be no less than 0.85. To further reduce losses on all plant, transformers, and lines in an economical manner, it is recommended that FEA raise the power factor to 0.9, effective after a grace period of, say, three years. 3/ In August 1992, the GOF announced its decision to shut down Finapeco. - 19 - Table 3.3: EXISTING GENERATING CAPACITY (MW) Installed Available Capacity Capacity VLTS Diesel Plants (Western Region) 23.15 21.95 Diesel Plants (Central Region) 44.54 39.88 Hydroelectric Plants (Wailoa) L_ 83.20 72.00 Total 150.89 133.83 Isolated Systems Rakiraki Power Station 1.04 1.04 Labasa Power Station 6.60 6.52 Savusavu Power Station 1.41 1.34 Levuka Power Station 1.63 1.48 /a At present, the station peak output limited to approximately 72 HW because of restrictions in the waterways. Source: Annex 4. Table 3.4: TRANSMISSION AND DISTRIBUTION LOSSES - 1990 (Z of gross generation) Transmission Total Losses Station and System use distribution VLIS 8.6 1.3 7.3 Rakiraki 6.9 n.a. n.a. Labasa 9.2 3.0 6.2 Savusavu /a 5.3 1.1 4.2 Levuka 6.2 1.7 4.5 la The figures are not reliable. Source: FEA. - 20 - Rural Electrification 3.18 Nearly 1,000 of Fiji's 3,000 villages and settlements have been electrified through grid extensions, stand-alone diesel systems, small hydro systems and photovoltaics. The majority of rural electrification has been through grid extensions from the primary FEA systems of Viti Levu, Vanua Levu, and Ovalau. By the end of 1991, approximately 170 villages will have receired small diesel systems for village electrification through PWD. DOE has been responsible for the electrification of a small number of villages through small hydro, biomass combustion and photovoltaic means. 3.19 In general, only the rural electrification by grid extension has consistently provided reliable power to rural consumers. Both the stand alone diesels and the renewables projects have suffered from inadequate maintenance and poor physical communication between rural users and urban technicians and administrators. 3.20 By 1992, an European Community (EC) -funded program will be implemented, which will include extension of the distribution systems in Vanua Levu and the Western and Central regions of Viti Levu (cost F$8.8 million), construction of a diesel station with two 365 kW units at Korovou (cost F$0.6 million), and construction of a 13 km 11 kV line to interconnect the Wainiqeu hydro scheme with Savusavu (cost F$0.7 million). FEA will be responsible for the local cost component (approximately 40X) of the distribution works included in this program. VLIS Power System ExDansion 3.21 A preliminary expansion plan has been developed for VLIS, based on a review with FEA of its development plans for the 1990s. This plan, which draws extensively on the FEA Tariff Study,3/ (i) uses the projected base case load growth rate, (ii) assumes that the present level of losses and the present load factor will not change, (iii) takes account of the capability of the existing plant, (iv) takes into account FEA's need to minimize its capital investments in the next five to ten years, given FEA's present difficult financial situation (see para. 4.18), and (v) assumes a relaxation of FEA's reliability of supply criteria. The system information and data used in determining the expansion plan requirements are summarized in Table 3.5 and provided in greater detail in Annex 5. The investment cost streams are summarized in Table 3.6. 3.22 The reliability of uRDplY criteria are critical in determining the VLIS expansion plan, because, under normal operating conditions, the VLIS system firm capacity (Table 3.5) exceeds the projected peak demand. Thus, any justification for additional capacity must be based on the likelihood of a failure on the steel-tower 132 kV transmission line from Wailoa to Vuda in the west, and to Suva in the east. FEA's reliability of supply criteria require sufficient diesel generating capacity, both on the eastern and western sides of the island, to meet at least 85% of peak demand in the event of transmission line failure. While this transmission line is vulnerable to cyclones, in the eight years of its 31 Fili Electricity Authority Tariff Study, Asian Development Bank, April 1991. - 21 - existence, during which many cyclones have occurred, not a single tower has failed. Table 3.5: VLIS POWER DEVELOPMENT PLAN: SUMMARY DATA 1991 1995 2000 Capacity and Peak Demand --------------MW-------------- Diesel capability 61.8 68.1 68.1 Firm hydro capability 61.0 67.0 72.0 Total capability 122.8 135.1 140.1 Reserve allowance 20.0 27.2 32.2 System firm capacity 102.8 107.9 107.9 Projected peak demand 68.6 78.6 93.1 Eneray Generation --------------GWh------------- Hydro Generation 367 367 367 Diesel Generation 18 75 156 Total Generation 385 442 523 Source: Mission estimates. 3.23 In view of the transmission line's past reliability, the question is whether an alternative technical solution would be cheaper than providing excess generating capacity. While the risks of transmission line failure are real, and PEA's desire to provide a high level of reliability of supply is understandable, it is doubtful that the consumers would be prepared to pay for such reliability. Rather than building additional standby capacity, it is recommended that PEA study alternative approaches for achieving a reasonable reliability of supply, albeit with some relaxation in the reliability of supply criteria. 3.24 One alternative, which FEA has already investigated, is the use of special lightweight emergency towers that can be moved by helicopter and installed relatively quickly if a tower fails. Another alternative is the use of temporary wood pole structures, which have been used in many parts of the world at 132 kV (and even higher) voltage levels. The necessary poles and related equipment could be maintained at suitable locations ready for emergency installation if transmission line failure occurs. These materials would be significantly cheaper than excess generating capacity. These, and other possible, solutions may well require the acceptance of several days of load shedding if a 132 kV line tower topples. This load shedding should be acceptable to FEA's customers, especially when it is recognized that large parts of the distribution system may be out of service following a cyclone. In view of the potential cost savings from a revision of the reliability criteria, it is - 22 - recommended that FEA review this matter urgently so that unnecessary commitments to additional generating capacity may be avoided, and firm criteria for development planning be established. 3.25 If FEA's reliability of supply criteria are relaxed somewhat, there will be adequate generatin8 capacity to meet the projected load until the early 2000s. This result assumes that FEA will supply 60 GWh/year to EGM; any reduction in EGM operations, or a decision by EGM to install its own generation facilities, will extend the pericd during which FEA would not have to add capacity. 3.26 Even though one-third of the FEA diesel units, close to 9 MW of capacizy, are pre-1970, the general condition of the FEA diesel plants is of a high standard, and it appears that the existing units are capable of providing reliable service to 2000, based upon the operating hours expected of them. The total diesel generation in 2000, assuming no new hydro capacity is added, is projected to be about 156 GWh, assuming EGM's consumption to be 60 GWh/year. At this generation level, only about one-third of the diesel capability would have to be operated, and there would be ample reserve capacity for maintenance and unplanned outages. 3.27 Since the VLIS diesel capacity together with the Wailoa Hydro Plant appear capable of meeting the generation requirements until beyond 2000, the recommended expansion plan does not call for any plant additions, with the qualification that if the larger diesel units are not capable of baseload operation for lengthy periods, then it will be necessary consider the addition of a large diesel unit, or an equivalent hydro development. There will be adequate time, before plant additions are required about 2000, to assess the hydro/diesel/gas turbine options, and the information available in a few years time, on load demand, oil prices, and further hydrological and other data on potential hydropower developments will be more realistic for conditions in the year 2000 than information available today. The expansion plan does include repairs to the foundation of one of the Kinoya 9.5 MW diesel units, presently derated to 6.0 MW, and for the transfer of an out-of-service 2.8 MW diesel unit from the decommissioned Suva Power Station to Kinoya. These projects will add 6 MW of capacity to the system at a relatively small cost. 3.28 Although there is some technical justification for FEA's planned subtransmission and distribution expenditures for VLIS for the period to 2000, FEA may not be able to afford them, given its precarious financial condition. (See vara 4.18). In view of this, although these expenditures have been included in tu. plan, it is recommended that FEA review these and other prospective investments closely in the next few years in light of its evolving financial situation. 3.29 The firm and average caRacitY available from the Monasavu reservoir can affect the overall VLIS development plan. There are indications that the firm and average reservoir capacity may exceed the original design figures that have been used until now. Any increase in generation from Monasavu could extend the period of time before additional generation is necessary on the system and will certainly reduce the amount of diesel generation required, resulting in considerable savings to FEA. A two-phase study, proposed by the Department of Energy, will assess the firm and average capability of the reservoir, on the - 23 - basis of data that was not available when Monasavu was designed. It is recommended that this study start as soon as possible; the terms of reference for the first phase of this study are included in Annex 6. Since power demand has increased beyond the presently accepted firm capacity level, it is essential that an operating rule curve be used for the operation of the reservoir, in order to achieve optimal use of the resource by avoiding unnecessary higher-cost diesel generation. Hence, it is recommended that the second phase of the study, including the development of a reservoir operating rule curve, follow shortly after completion of the first phase. 3.30 The coteneration potential of a number of industrial operations in Fiji has not been fully utilized in the past. In the future, there would be significant benefits to FEA, both in lower capital expenditures and reduced diesel generation, if it would purchase larger amounts or power from FSC, the largest cogenerator. In view of the potential savings from power purchases, compared to FEA's own incremental costs, it is recommended that FEA aggressively pursue the possibility of power purchases from FSC's plant in Lautoka for VLIS. In order to realize these benefits, FSC would have to invest in high efficiency steam boilers and electric generators; increased excess electricity could also accrue with greater efficiency in the process. Without an adequate price for exported electricity under an acceptable contract, FSC would not undertake these capital expenditures. Isolated Systems Expansion Plans 3.31 The recommended development plans for the isolated systems are based on the 1991 FEA Tariff Study, with the only difference being the timing of generation additions. For Rakiraki, the plan includes the installation of two 365 kW diesel units in 1991, the retirement of one similar sized unit at that time, and the installation of a further 365 kW unit in 1997 or 1998. For Labasa, the plan includes the transfer of three 1.14 MW units to the new station during the next three years, and the installation of an additional 1.6 MW unit in 1993 and 1997. For Levuka, the plan includes an additional 365 kW unit in 1992 and 1993. FEA may relocate the power station from the central part of town to avoid environmental problems, but, given the uncertainties regarding this relocation, no costs have been included for this work. FEA may have to curtail its planned subtransmission, distribution and rural electrification reinforcements and extensions because of financial difficulties. Overall FEA Expansion Plans 3.32 Based on the above discussion, it is concluded that FEA will be able to meet the increasing electricity requirements in its existing supply areas, with moderate scope for expansion, with an investment program averaging F$6.2 million (in constant 1990 F$) per year over the 1991-2000 period (see Table 3.6). Capacity expansion is needed only for the isolated systems, and the major expense for the VLIS will be for subtransmission and distribution, though FEA's financial condition may make it difficult to undertake these expenditures. Table 3.6: CAPITAL INVESTMENT COST SUMMARY 1991-2000 (F$'000, constant 1990 prices) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 VLIS Foundation repairs Kinoya Foreign 145 Local 55 Transfer of 2.8 MW to Kinoya Foreign 50 Local 200 Subtransmission distribution Foreign 4,200 3,000 3,500 1,600 2,600 2,600 1,800 2,400 2,300 2,300 Local 2,265 1,842 1,337 1,000 1,490 1,450 1,300 1,560 1,300 1,300 Rakiraki Addition 365 kW diesel units Foreign 240 105 Local 50 20 Misc. rural electricity Foreign 65 65 65 65 65 65 65 65 65 65 Local 40 40 40 40 40 40 40 40 40 40 Labasa New 1.6 SW diesel units Foreign 1,300 1,300 Local 230 236 Transfer of diesel plant Foreign 200 40 Local 800 135 Subtransmission, distribu- Foreign 625 1,000 650 180 800 820 800 500 500 500 tion & R.E. Local 340 707 385 100 430 444 445 280 280 280 Savusava Distribution and RE Foreign 670 450 275 85 85 85 85 85 85 85 Local 445 293 180 55 55 55 55 55 55 55 Levuka Office and cooling towers Foreign 34 Local 80 Additional 365 kW diesel Foreign 105 105 units Local 20 20 Distribution and RE Foreign 27 27 27 27 27 27 27 27 27 27 Local 20 20 20 20 20 20 20 20 20 20 Total Investment Foreign 6,206 4,687 5,972 1,957 3,577 3,597 4,182 3,077 2,977 2,977 Local 4.095 3.057 2,412 1,215 2.035 2,009 2,116 1.955 1.695 1.695 Total 10,301 7,744 8,384 3,172 5,612 5,606 6,298 5,032 4,672 4,672 Source: Mission estimates. - 25 - Renewable energy Hydro 3.33 In the near term, hydro power has the greatest potential for renewable energy development. The great majority of Fiji's electrical energy already comes from one hydro system, Monasavu, and there are many smaller sites which either could be integrated into the grid or could provide power to a small grid near the facility. FEA has identified, and in many cases made surveys of, over 70 sites that have hydroelectric potential ranging from 50 kW to several megawatts. At this time, about ten sites appear to have economic promise through stand-alone mini-grids or integration into the primary PEA generation system. DOE has also located, and in some cases surveyed, over 15 additional sites with hydroelectric potential below 50 kW. Of the known sites, DOE estimates that no more than five sites are in close enough proximity to loads to make village scale generation comparable in cost to other village generation options such as small diesel or photovoltaics. 3.34 These identified sites require additional investigation, particularly stream monitoring and general hydrological data collection, before a decision to develop them is made. Stream monitoring equipment has already been purchased, and a Japanese volunteer is expected to become available in 1991 to examine potential mini and micro hydro sites in detail. 3.35 Since Fiji's hydro resources are being identified and investigated in an adequate and timely manner, no change in the existing programs is recommended. Solar 3.36 Measurements show that there is excellent quality, long term solar radiation at Nadi and Laucala Bay. Unfortunately, these measurements are relevant only within a few kilometers of the measuring sites because of substantial micro-climatic variations resulting from the mountainous topography, which strongly affects local cloud cover. Experience with photovoltaic powered radio-telephones indicates that the villages located in the mountainous interiors of the large islands require at least double the panel capacity as systems located in sunny coastal areas. 3.37 While solar radiation patterns have not been mapped out, it appears that excellent solar conditions exist in some parts of Fiji. In 1986, the Forum Secretariat contracted with the New Zealand Meteorological Society to improve the data collection and analysis of solar radiation in the Pacific region. Though instruments have been installed in several countries, little analysis of existing sunshine and hour and solar radiometric data has been carried out. When the analysis is completed, adequate solar information for the areas with major populations and the major outer islands will become available. However, photovoltaic applications will be particularly useful in the more remote islands, for which the data are not being collected at present. Hence, it is recommended that the DOE, in coordination with the Fiji Meteorological Service and the Forum Secretariat Energy Division, select additional remote sites for solar radiation data collection and seek donor assistance for implementation. - 26 - biomatss 3.38 The largest energy quality biomast rcsource is agricultural waste from the processing of sugar cane, cocoa, coconut and rice. Fiji's largest biomass resource lies in the forests, which include both indigenous and plantation tracts, so that forestry and mill waste from harvesting and processing of pine and plantation hardwoods is also a significant biomass energy resource. However, mill operations are dispersed and individually much smaller than plantation based forestry, so that it is relatively difficult to use this resource. Fish and poultry production are concentrated sufficiently to make consideration of the economic production of biogas appropriate, but no development has taken place. Large animal production is dispersed, so that there are no concentrations sufficiently great to allow deve.opment of biogas energy systems for other than individual or household use. 3.39 BaRasse. The waste (bagasse) from sugar milling has been used for many years to fire sugar mill boilers for process heat, and the Labasa mill has also been producing sufficient cogenerated electricity to provide most of the electrical needs of the Labasa grid durlng the processing season of the mill (typically June through January). Most or the bagasse is used inefficiently for process heat and electricity production. The utilization of the remaining energy potential would require capital investment in storage at Labasa and in more efficient boilers, additional generating equipment and bagasse storage at the Lautoka and Rakiraki sites. The electricity production season is shorter than it could be because there are no long term bagasse storage facilities. Therefore, the generating season could be extended significantly if the proper storage for the excess bagasse were provided. These investments would be financially attractive provided FEA were to purchase electricity at a rate comparable to its diesel production costs. In view of the benefits to FEA from purchasing cogenerated electricity (see para 23, 3.26), it is recommended that FEA provide appropriate incentives for expanded bagasse-based electricity production on Viti Levu and Vanua Levu through pricing electricity pu-chase at a price equivalent to its avoided cost or shared capital arrangements. 3.40 Wood. While large scale projects based on the harvesting and processing of inditenous hardwoods are uneconomical, small scale use for plant process heat and, in some cases, steam based electrical generation to service the processing facility may be practical. Such uses should be incorporated on a project by project basis. In order to use this potential resource, it is recommended that DOE continue its program for technical and financial assistance, in association with donors, to encourage appropriate development of small scale biomass utilization at indigenous hardwood processing sites. 3.41 The production of lumber and other products based on oine Plantation trees presently results in over 30,000 MT of fuel quality biomass waste each year, and production increases are forecast through the next decade. Since this resource is concentrated at three sites, it can be effectively used for energy purposes. While significant amounts of this waste are already being utilized for process heat and sawmill power, if FEA increased its purchase price, investments to allow increased electrical production for provision to the grid could be justified. - 27 - IV. POLICY AND INSTITUTIONAL ISSUES Petroleum Products Pricing 4.1 The prices of four petroleum produc a - motor spirit, ADO, solvent (white benzine) and pre-mixed outboard fuel are controlled at the wholesale and retail level. The basic price is set for the main centers of Suva, Lautoka and Lami, and prices for other areas include an allowance for freight. The controlling body is the Prices and Incomes Board (PIB). The PIB Secretariat analyzes the actual landed costs of the companies based on shipments and roughly every quarter adjusts wholesale and retail prices of these products based on changes in external cost factors - FOB costs, F$/US$ exchange rate, and freight rates. The exact timing of the changes is based largely on a fairly ac(urate tracking of the companies' Fiji inventory positions. Less frequent adjustments are made for changes in internal distribution cost factors, based on company submissions. These infrequent adjustments for onshore costs are usually incorporated in a general adjustment for external changes and are not designated transparently as internal adjustments. The formal adjustment/establishment process entails a recommendation by the Secretariat to the one-member Board, the Permanent Secretary of Trade & Industry, who passes on hls recommendation to the Minister of Finance for promulgation. A price decrease requires 14 days notice to come into effect, while a price increase is immediate. 4.2 Table 4.1 summarizes the official retail and wholesale prices in effect (on February 11, 1991) for motor spirit and ADO. Prices are differentiated by location to reflect transport costs; there are a total of twelve separate schedules in the PIB price order, defined by location. Three of the schedules are shown by way of illustration (Table 4.1). The wholesale and retail prices are the only figures which appear in the published order, and other sub-elements, such as CIF cost and total duties, are not explicitly known. The total duty has been estimated by combining the applicable duty rate information shown in Annex 7 with other information on internal costs. The 432 rate of taxation on gasoline is high compared with U.S. and Canadian rates but lower than the typical European and African levels which average about 602 of retail price. It should be pointed out, however, that since most of the tax is a flat charge (F' 33/liter), a return to more normal CIF cost levels and corresponding lower retail prices, will result in total duties of about 50X of r.. 1il price in Fiji. The taxation of ADO at 272 of retail price (increasing to emne 30% at lower prices) is comparable to North American levels, but lower than the average of about 402 in sub-Saharan Africa and 502 in Europe. 4.3 Although the PIB price regulatory framework, with its formula system of external supply cost determination, seems to be doing an effective job of controlling prices at efficient levels, there are some deficiencies in the process. The present system lacks transparency, clarity, regularity and standardization in determination of the prices of petroleum products. There is no explicit price determination methodology, with all the approved elements stated explicitly. There is no provision for regular (e.g., once every year, at the same time) standardized submissions of company cost data for adjustment of internal distribution factors in the price build-up. Further, the PIB Secretariat information support and expertise in the area of international product supply, pricing and affreightment is not well-developed, even though this - 28 - analytical capability is particularly important in monitoring the impacts of changing supply arrangements and fluctuating markets. For example, to calculate the true supply cost, it is essential to know the amount of imports from Australia and New Zealand, as opposed to the present formula, which is based only on Singapore. Table 4.1: FIJI OFFICIAL PETROLEUM PRODUCT PRICES (EFFECTIVE ON FEB 11, 1991) Schedule I Schedule 4 Schedule 5 Suva, Lautoka, Viti Levu Labasa and Lami Remote Environs F¢/l US$/USgal F¢/l US$/USgal F¢/l US$/USgal Motor Spirit Wholesale Price 81.04 2.20 85.04 2.32 83.41 2.27 Retail Price 85.00 2.32 89.00 2.43 88.00 2.40 Estimated duties 36.40 as I of retail price 43.01 ADO Wholesale Price 64.90 1.76 68.90 1.87 67.21 1.82 Retail Price 68.00 1.85 72.00 1.96 70.00 1.90 Estimated duties 18.60 as Z of retail price 27.0% Source: Mission estimates based on PIB data. 4.4 In order to ensure that petroleum product prices in Fiji are as low as possible, it is recommended that GOF adopt a two-phase price reform approach. (a) Phase 1. Improve and upgrade the formula-based price-setting mechanism. This requires the development of a completely transparent price determination methodology, with all the elements shown clearly. Internal distribution cost elements would be standardized to a limited number of basic categories and the companies would submit audited historical data once per year, pursuant to determination of the levels for the ensuing year. GOF would require technical assistance for this phase, which may be provided by experts from a regional energy agency. (b) Phase 2. Institute complete price deregulation. Once the Phase 1 system has been functioning effectively for some years, petroleum - 29 - product prices should be fully deregulated in order to obtain the full benefits of effective competition, not only from the existing firms but also from potential entrants who would exert competitive downwards pressere on prices. After deregulation, GOF should continue to monitor prices. The formula mechanism and staff expertise developed in Phase 1 will serve as an effective monitoring system to assess the performance under liberalization. Complete price deregulation should be accompanied by effective subsector regulation in non-price areas such as weights and measures, facilities design and inspection, safety, quality control, etc. LPG 4.5 The price of LPG is not regulated by GOF. A uniform price is maintained by Fijigas for bottled gas at all major centers in Fiji. In February, 1991, this price was F$1.43 per kg for 13 kg cylinders, and F$1.41 per kg for 50 kg cylinders. A deposit of F$20 per bottle is charged for bottle purchase, maintenance and service, though this deposit covers only about one-third of total costs. Electricity 4.6 Electricity tariffs should reflect the economic costs of electricity supply in terms of both the relative balance between peak (capacity) and energy charges for each consumer group and the relative level of tariffs between consumer groups. Hence, it is recommended that the tariffs for each consumer group reflect the corresponding marginal costs of supply. Marginal Costs of Electricity SuDply 4.7 Marginal Capacitv Costs. On the VLIS, the current capacity is likely to be adequate for many years. Therefore, from a generation standpoint, peak demand imposes very little cost on FEA. Accordingly, the marginal cost of generating capacity on the VLIS should be measured in terms of the costs of retaining existing plant which could otherwise be decommissioned, and not in terms of the costs associated with new investments in generating plant. Based on this approach, the net avoidable costs of generating capacity was estimated recently by the PEA Tariff Study to be F$12/kW per year. 4.8 For the isolated supply systems, the expansion plan calls for 365 kW diesel sets for Rakiraki, Savusavu, and Levuka. On the basis of the investment costs associated with this type of diesel sets, the FEA Tariff Study estimated the net effective cost to be F$60/kW per year. For the Labasa system, based on a 1.6 MW diesel set, the net effective cost was estimated to be F$90/kW. 4.9 Marginal Costs of Energy. On the VLIS, the marginal energy cost will change over time. During 1991-95, the incremental energy demand can be expected to be met from Monasavu, at a marginal cost of less than F$O.01/kWh. After 1995, incremental energy demand will have to be met from diesel plant (or new hydro schemes), with a marginal energy cost in the range F$0.08-0.12/kWh. - 30 - 4.10 The marginal energy cost at Rakiraki, Savusavu and Levuka is estimated to be F$O.13/kWh (net of station usage). For Labasa, the cost is estimated to be F$0.12/kWh. 4.11 Marginal CaDacity Costs of Transmission/Distribution. The average incremental cost of transmission, sub-transmission and distribution varies considerably by system and voltage level (see Table 4.2). Each voltage level has been estimated for the VLIS and the isolated systems, as a proxy for the marginal cost of capacity. Table 4.2: MARGINAL TRANSMISSION/DISTRIBUTION CAPACITY COSTS la (F$/kW per year) 11/6.6kV 415/240V VLIS 152.75 177.92 Rakiraki 14.35 25.32 Savusavu 34.72 65.90 Labasa 16.04 25.62 Levuka 10.07 43.74 La Includes allowance for losses at each voltage level. Source: FEA Tariff Study. Electricity Tariffs 4.12 A substantial restructuring of the electricity tariff is required if it is to reflect the marginal costs of supply. Further, the average electricity tariff should be sufficiently high to allow FEA to operate in a financially sound manner. The FEA Tariff study has developed a restructured electricity tariff. As part of this proposed tariff, the minimum monthly charge is replaced by a much reduced Consumer Service Charge that reflects the actual costs imposed by each consumer group. For most lower income domestic consumers, this reduction will help to offset the proposed tariff increases.4/ 4.13 In order to encourage cogeneration, FEA will have to set prices that will attract industries to sell to the system, but ensure that both parties 4/ Effective August 1, 1991, FEA instituted a 10% across-the-board increase in its electricity tariff. However, no changes were made to the tariff structure at this time. (See Statistical Appendix, Table 8). - 31 benefit financially from the arrangement, in addition to improving reliability of supply for both. FEA should be prepared to pay up to the system avoided cost of generation at each of its supply systems. 4.14 At present, FSC is both a consumer and supplier of energy to FEA. Under the present arrangement, FEA sells to FSC at a subsidized rate, and also buys from PSC at a subsidized rate. This ystem does not place the arrangement between PSC and FEA on a sound financial basis. Hence, it is recommended that FEA charge FSC the same rate as other HV industrial consumers, and buy from FSC at its system avoided cost. This sound financial arrangement would also allow FEA to offer the same system-specific purchase price to any other potential supplier. 4.15 Whether FEA should continue to supply power to EGM even beyond the grid's hydro station capability involves two issues: (a) evaluation of the energy supply capability including the re-calculation of the rule curve for the Monasavu reservoir, and (b) evaluation of the financial adequacy of power supply arrangement between FEA and EGM. The discount given for hydro supply to EGM on "as available" basis should be reviewed to check if FEA can get a better price from EGM, as it did in August, 1991, provided the rate is kept attractively Jow compared to EGM's variable cost of operating their diesel units. If FEA's diesel units are to be eventually used to supply EGM, then it does not make financial sense for FEA to supply EGM unless the rates are set based on a margin over FEA's variable costs of diesel supply. Strenzthening FEA FEA's Financial Performance 4.16 A summary of FEA's past and projected financial performance is provided in Annex 8. As noted in the World Bank's 1989 Financial Options Review, FEA's financial position deteriorated markedly during the 19809, largely as a result of cost overruns on the Monasavu project (F$90 million), additional diesel expenditure caused by the delay in commissioning the project (F$46 million), revenue shortfalls through a failure to implement planned tariff increases (P$13 million), and increased debt service costs following the 1987 currency devaluation (F$104 million). In order to restore FEA to a sound financial position, the World Bank recommended that a series of measures, including the restructuring of PEA's domestic debt to allow a three-to-five year moratorium on principal repayments, a program of real tariff increases, the conversion of a F$15.5 million GOF loan to equity, and the injection of further equity capital by GOF over a five year period. 4.17 The above recommendations were discussed and agreed to at a meeting of FEA creditors in London (February, 1990). Some progress towards a financial restructuring has been made since then. In March, 1991, FEA reached agreement with the Fiji National Provident Fund (FNPF) for the consolidation of FEA's domestic debt (short-term loans and bonds) into a single 15 year loan at a 10.5Z per annum interest rate with a five year grace period on principal repayments. While electricity tariffs were increased by 10% in August, 1991, this did not imply an increase in real terms, given an inflation rate of approximately 12Z. While the F$5.5 million GOF loan has been converted to equity, PEA has received no further injections of equity capital. As a result of these delays in - 32 - restructuring, FEA's position is now considerably worse than it was in 1989, and in the absence of any working capital, the utility is funding long-term investments by issuing short-term promissory notes. Future FEA Financing Strategy 4.18 Short-term need for funds. On the basis of financial projections,5/ FEA's immediate needs for funds within the next twelve months are estimated at F$95 million (Table 4.3). Table 4.3: FEA'S SHORT-TERM NEEDS FOR FUNDS Item Funds Needed F$ million Provision of 2 months' working capital 15 Promissory notes payable 60 Principal repayment of FNPF debt 10 Remaining funding shortfall 10 Total 95 Source: Mission estimates. 4.19 In order to prevent FEA from incurring further overdrafts and short- term debt and allow FEA to rebuild its equity base, it is recommended that the following measures be undertaken. (a) Fresh Eguitv. GOF should inject fresh equity into PEA at the outset rather than through annual increments of P$5 million allotments from 1990 to 1996. Since Government finances will preclude GOF from injecting the entire F$25 million in 1991, a minimum outlay of F$15 million (equivalent to FEA's two months' cash flow needs) is recommended for 1991. The balance of F$10 million (or much less if the working capital base expands adequately over the year) can be addressed in 1992. These GOF equity investments would also attract commercial banks to invest in PEA's proposed bond issues. (b) Bond Flotation. FEA's promissory notes should be converted into longer term debt by floating FEA bonds, in tranches as FEA's promissory notes mature or as conditions in the securities market permit. The terms of the bonds (3-9 years) may vary to satisfy market 5/ The projected profile of FEA's financial operations during the 19908, given in Annex 8, assumes that asset revaluation is adopted, and adjustments are made to FEA's accounting treatment of the 1987 foreign exchange losses. - 33 - requirements so as to ensure maximum subscription as well as equalize FEA's payment streams over the years. (c) Tariff Increases. There should be a tariff increase of 6.5%, effective immediately, over and above the 102 increase instituted in August, 1991, followed by 10% nominal increases in 1992, 1993, and 1994. These proposed increases reflect, in part, the GOF's decision to make FEA liable for corporate income tax from January, 1991. (d) Future Capital Expenditure. GOF should provide the funds to finance any capital expenditures, but insist that tariffs be high enough to attain an 8% rate of return on the revalued rate base. 4.20 Financial Controls. It is recommended that FEA apply tight financial controls in its operations. As a policy, the FEA annual budget should not plan additional short-term borrowing or bank overdrafts. Further, FEA management should adopt a closely monitored rolling cash flow plan (daily, weekly and monthly), and use it as a financial and operational control instrument. This rolling cash plan should set sub-limits to authorized budgetary disbursement so as to restrain FEA from using overdraft facilities. Further, the plan should be used to determine, Drior to contracting of services and supplies, if and when funds will be available to meet the desired expenditures. Accordingly, procurement and service contracts cannot be entered into unless they are cleared for funds availability. This control system will prevent FEA from incurring fresh debts, and accordingly avoid the issuance of more promissory notes. 4.21 In order to avoid the potential friction arising from a tightly controlled disbursement syst-m, it is recommended that FEA's management establish clear criteria for prioritizing expenditures. In doing so, occasionally trade- offs will have to be made between maintaining a high level of security of power supply and preventing FEA from becoming insolvent. The management should inform the operating units that the control system is intended to provide them with early information on funds availability to allow them to undertake contingency operating procedures when their funding requests cannot be supported. 4.22 Changes in Accounting Practices. Two changes are needed in FEA's accounting practices. First, consequent to the 1987 devaluation, a foreign exchange loss on FEA's foreign loan portfolio was charged against income for that year, resulting in an operating loss of F$110 million. For FEA's balance sheet, the loss translated to a negative retained earnings level resulting in an erosion of PEA's total equity base from F$63 million in the previous year to negative F$42 million in 1987. A normal accounting practice is to carry forward unrealized foreign exchange gains/losses on loans by increasing the values of the associated assets, which are then recovered through a higher depreciation charge. In order to conform to normal accounting practices, it is recommended that this accounting treatment of unrealized foreign exchange losses be reviewed. 4.23 Second, in FEA's accounts, a relatively low level of depreciation is charged, as a result not only of historical cost-based asset valuation, but also of the unrealistically long normal operating life assigned to the assets, such as 80 years for the buildings, 75 years for hydro dam infrastructure and 50 years for hydro plant and machinery. In order to put FEA's asset valuation on a more realistic basis, it is recommended that the normal operating life of the assets - 34 - be re-estimated and if possible, in the light of FEA's limited capital resources., a faster-paced depreciation method should be considered (e.g., sum-of-years digits) in lieu of a straight-line depreciation approach for a closer match with FEA's actual financial flows. 4.24 On this basis, it is recommended that a comprehensive Dhysical and cost aoDraisal of FEA's assets be made, and that results be used as basis for restoring the appropriate value of equity and future depreciation charges. It is also recommended that FEA adopt asset revaluation as an accounting policy, as this will help preserve the firm's financial viability, given the capital- intensive nature of its hydroplant operations. PEA's ODerational Strategy 4.25 FEA's Ooerational Autonomy. In the past, FEA's relative operational autonomy from GOF has permitted FEA to render satisfactory service to its customers. In view of FEA's successful record in the past and the likely costs of greater regulation in the future, it is recommended that PEA's operational autonomy continue in the future, even though GOF will have to provide financial support to FEA, and FEA should remain fully accountable for the management of corporate funds and its service operations. In the future, if FEA abuses its monopoly status, then GOF should make the appropriate changes and exercise stronger regulatory control over FEA. 4.26 Long-term Planning. In order to enable the company to formulate its strategies with adequate lead time, it is recommended that FEA pursue multi-year plans, including a three-year indicative budget. The longer term plans will give direction to, and complement, the rolling cash flow plan. However, at present, there is a need to improve the area of planning and development. It is recommended that PEA's system planning and development department be appropriately and adequately staffed, and be headed by a qualified and experienced person, who should hold a key senior management position reflecting the importance of the departmental functions. Further, given FEA's size, it is recommended that PEA engage a suitably qualified economist to work in the System Planning Department. Rural Electrification 4.27 Fiji's rural electrification system has become increasingly strained because (i) FEA has clearly reached the economic limit of grid extensions for rural districts, and (ii) the number of stand-alone projects to be installed and administered by PWD and DOE has expanded well beyond the ability of either organization to administer and maintain. PEA's arid extensions 4.28 The costs to FEA of rural electrification represent a significant burden on FEA's finances. An analysis of FEA's engineering cost estimates (HV and LV) in respect of the forthcoming EC-funded rural electrification program (see para 3.17) indicates an average cost of F$1515 per consumer connection, which is much higher than the typical cost of around F$300-400 per urban consumer. From FEA's perspective, this cost difference is magnified by two other - 35 - factors: first, the level of contribution from consumers, and second, the average level of sales per consumer. 4.29 For rural electrification projects, FEA requires prospective consumers to meet 25% of the estimated (direct labor and materials) cost. Further, under normal circumstances, FEA will not undertake projects for which the cost per consumer exceeds F$2,400. In contrast, for urban extensions, FEA offers the consumer (or property developer) the option of either paying a 75% non-refundable contribution or meeting the total cost of the project, which is refunded over five years by reducing the electricity bill by up to 50%. 4.30 The difference between the urban and rural connection costs is further exacerbated by the lower average electricity consumption in the rural areas, particularly in the newly electrified areas. For example, in September, 1990, the average consumption in FEA's predominantly rural supply areas was only 73 kWh/month, in contrast to the urban average of 177 kWh/month. 4.31 For these reasons, rural electrification is regarded by FEA as a non- commercial activity. At present, it is FEA's other consumers who ultimately pay the cost of such projects, apart from the contribution of prospective rural consumers. Stand-alone prolects 4.32 At present, two major stand-alone rural electrification projects are being contemplated, with a total investment of F$8.21 million (Lakeba, Gau, Koro, Moala and Rotuma) in stand-alone diesel systems, and F$3.5 million (Taveuni) for stand-alone hydro. These two projects nearly triple the number of consumers served by stand-alone systems, and represent a technical and administrative requirement far in excess of that existing within the responsible agencies: DOE, PWD, and the Ministry of Rural Development. Since each of these stand-alone projects is a mini-grid system encompassing many villages, the administration and maintenance systems that have been used for earlier stand-alone systems (which serve a single village) cannot be used. 4.33 To take care of the technical and administrative operations of all stand-alone rural electrification schemes that are primarily for social benefits and are not commercially viable, a specialist agency must be developed and provided an explicit budgetary subsidy. Hence, it is recommended that a Rural Electrification Authority be created, preferably asing the PWD rural electrification group as the core staff. This Authority will design, install and manage these new projects as well as accepting all existing stand-alone rural electrification projects under its management umbrella. Alternatively, the responsibility could be given to PWD, with FEA providing technical assistance on a fee-for-service basis. 4.34 The proposal for the diesel project includes approximately F$800,000 for external consultants. If these funds are available, it is recommended that they be used to establish the Rural Electrification Authority, and to support expatriate and local engineers and technicians in the design and installation of these projects. - 36 - Desirability of ExDansion of Rural Electrification 4.35 At present, given FEA's uniform national electricity tariff, rural electrification requires a subsidy, which is estimated to be in excess of F$1 million per year. This subsidy will be substantially higher if proper operation and maintenance capability is not present, as is the case with the proposed projects. It is likely the funds used to subsidize electricity production on these five islands would have greater economic and social development benefits for the people of these islands if the funds would be used for other purposes. 4.36 For example, in 1990 the 100 kW Bukuya project was completed as the first of several mini-hydro projects planned for hydro based rural electrification. Though complete, this project is not operating due to a lack of customer connections. It appears that this project was conceived and implemented without adequate market surveys or prior customer commitment. The favorable economic analysis of the project was based on an assumption that essentially all of the possible households would connect to the system and use at least minimal lighting. However, in the six months after the commissioning of the project, less than 20Z of the possible households had agreed to connect, which would not produce sufficient revenues to pay even FEA's maintenance costs. 4.37 In order to ensure that the rural electrification investment programs are economically and socially justified, it is recommended that the proposals for the expansion of rural electrification be re-evaluated. Renewable Energv Solar 4.38 Nationally broadcast television is likely in the near future, and this is expected to create a strong demand for rural electrification. Fiji commercial interests and DOE are presently evaluating solar powered TV and video systems for use in the remote areas. 4.39 Though the market pressuires may be strong for electrification through solar photovoltaics, the support for rural solar power is weak. Unless an organization is created with an adequate technical and administrative capability for solar based rural electrification, the past failure of solar photovoltaic projects will be repeated. The proposed Rural Electrification Authority could have this responsibility. Wind 4.40 In Fiji, winds vary in direction and intensity on a seasonal basis, and energy quality wind is uncommon. The tall, irregular tree cover in many parts of Fiji and the rough topography in other parts make turbulence near the ground a serious technical problem. Further, the presence of high humidity and high ambient temperature, usually combined with air borne salt, make the maintenance of both mechanical and electrical systems costly, and failures are frequent. While wind powered electrical generators have been installed in Fiji, at present none of them are operational, and no new projects are expected. Since wind power for electrical generation is still experimental in the Pacific Islands environment, it is recommended that the GOF not consider investments in wind - 37 - power until these systems are proven to be technically and economically satisfactory in conditions similar to those in Fiji. Further, it is recommended that the use of local resources for general monitoring of wind other than at established meteorological stations be given low priority. Biomass 4.41 Fiji's forestry program is soundly based and well managed. In particular, the legal and regulatory foundations are adequate to permit development of the forest resource without unacceptable environmental impact. However, the staff of the Forestry Department is insufficient to fully enforce the laws and regulations, so that violators are not always caught, and nor are those caught always prosecuted. In order to ensure that forestry rules are observed, it is recommended that the strength of the Forestry Department be increased. Other Renewable Sources 4.42 Geothermal. There is some evidence of geothermal resources on Vanua Levu and Viti Levu (hot rocks and hot springs), and there is a proposal to develop the Viti Levu resource (in conjunction with the large Namosi copper resource). Since this resource is poorly understood, and the developments of hot rock sites are globally few in number and have not been uniformly successful, it is recommended that the GOF make no investment in the near term in geotherm4l development. However, in order to permit any successes that may occur, it is recommended that the GOF allow controlled commercial development of this resources, with guarantees of purchase of power at commercial rates. Further, continued investigation of the extent and quality of the Vanua Levu and Viti Levu resources is appropriate, but not of high priority. 4.43 OTEC. Fiji has a potential for OTEC development, and Japanese commercial interests have proposed the development of a pilot project on the south coast of Viti Levu. While the primary objective of this project is mariculture, it also includes approximately 100 kW of electrical generation capacity. Since OTEC is not a commercially proven technology for power generation, it is recommended that the GOF not invest in such projects nor incur significant costs in the administration of such projects. Further, the environmental impact of such developments must be assessed before any projects are approved. However, in order to enhance the possibility of future OTEC development, it is recommended that DOE, in association with CCOP/SOPAC 6/, continue to make low-level efforts to locate promising sites near high load density areas or near to existing FEA high,voltage transmission lines, and that these sites be examined in detail through donor technical assistance programs. 4.44 Wave Energv. Although it is likely that wave energy is a potential resource, the quality and quantity of this resource has not yet been determined. Since commercial wave energy capability is likely within ten to twenty years, it is appropriate to start collecting data that will be useful in the future, particularly on sites clove to population centers or to existing FEA transmission 6/ Coordinating Committee for Ocean Prospecting/South Pacific Applied Geosciences Commission. - 38 - lines. It is recommended that DOE continue to seek donor technical assistance in these investigations, but with little direct DOE involvement. For example, some resource measurements are being funded by Norway on the south coast of Radavu, and it is appropriate for DOE to incur small administrative costs for this effort without any significant expenditures of local resources. - 39 - V. INVESTMENT AND TECHNIC%L ASSISTANCE PRIORITIES Petroleum 5.1 Subsector Focus. There is no need for GOF to invest in the petroleum sector since the petroleum supply system is functioning adequately. Consequently, the focus in this subsector should be on strengthening the petroleum price monitoring and surveillance capabilities. 5.2 Finapeco. The proposed Finapeco arrangements will imply additional economic and financial costs for Fiji, as well as the long-term risk that the efficiency of the monopoly operation will decline. In order to avoid these costs and risks, it is recommended that the GOF should wind down Finapeco as soon as possible, before additional costs are incurred. Such a decision would also benefit neighboring countries that are linked to Fiji through the existing petroleum supply network of the international oil companies. (See paras 3.6-3.15) 5.3 Price Monitoring. The PIB price regulatory framework lacks transparency, clarity, regularity and standardizatJon in the system, and the PIB Secretariat lacks adequate expertise in the areac of international petroleum product supply and pricing. In order to eliminate these problems, it is recommended that, in the short run, GOF develop a completely transparent price determination methodology, with technical assistance from experts provided by a regional energy agency. Later, once this system has been functioning for some years, it is recommended that GOF completely deregulate petroleum prices. (See paras 4.1-4.4) Electricitv 5.4 Subsector Focus. In this subsector, the focus should be on making better use of existing assets, with limited capacity expansion. The expansion plan for FEA calls for an annual average investment of approximately F$6.2 million over 1991-2000, with no capacity additions on VLIS. In view of FEA's precarious financial condition, it is recommended that FEA review its prospective capacity, subtransmission and distribution investments closely in the next few months. (See paras 3.17-3.32). 5.5 FEA's CaDacitv Needs. There are three possible ways for FEA to reduce the need for capacity expansion. First, FEA's capacity needs depend, in part, upon its reliability of service criteria. In view of the potential cost savings from a revision of FEA's reliability criteria, it is recommended that FEA relax its reliability of supply criteria and study alternative approaches for achieving a reasonable reliability of supply. (See paras 3.22-3.25). Second, FEA's capacity needs also depend upon the firm and average capacity available from the Monasavu reservoir. Since there are indications that the firm and average reservoir capacity may exceed the current estimates, it is recommended that the reservoir operating rule curve be developed. (See para 3.29) Third, there could be significant benefits to FEA if it could purchase power from FSC, the largest potential cogenerator. In view of these potential savings, it is recommended that PEA aggressively pursue the possibility of power purchases from PSC for VLIS. (See para 3.30). - 40 - 5.6 Cortoratization of FEA. In view of FEA's present difficult financial condition, it is recommended that no immediate major changes be made in the structure and form of FEA. 5.7 Regulatina FEA. In view of FEA's past record of satisfactory service to its customers and of the likely costs of greater regulation of FEA, it is recommended that FEA's past relative autonomy be continued. (See paras 4.27-4.28). 5.8 Rural Electrification Policy. In order to ensure that the rural electrification investment programs are economically and socially justified, it is recommended that the proposals for the expansion of rural electrification be re-evaluated. If it is decided to pursue these projects, then it is recommended that a Rural Electrification Authority be created. (See paras 4.35-4.36). Renewable Energv 5.9 Solar. Since the solar water heating market and the solar communications and marine marker systems are working well, no government attention is recommended. Given the failures in the solar domestic lighting systems, resulting from their inadequate maintenance, it is recommended that DOE's capabilities to design, install, and maintain these systems be strengthened. (See paras 2.21-2.23) Further, given the lack of adequate solar radiation data for the more remote islands, it is recommended that DOE, in coordination with the Fiji Meteorological Service and the Forum Secretariat Energy Division, collect and analyze such data, with donor assistance. (See para 3.37). 5.10 Bagasse. The efficiency of bagasse use for process heat and electricity production can be improved by better storage facilities and more efficient boilers, but these improvements require capital investments. In view of the benefits to PEA from purchasing cogenerated electricity, it is recommended that FEA provide further incentives for expanded bagasse-based electricity production. (See para 3.39). 5.11 Wood. In order to develop the potential use of indigenous hardwoods in small scale plant process heat and, in some cases, steam based electrical generation, it is recommended that DOE develop a program for technical and financial assistance, in association with donors. (See para 3.40). 5.12 Fuelwood. Fiji's sound forestry program is capable of providing continued convenient access to fuelwood, but the Forestry Department lacks adequate strength to fully enforce the laws and regulations. In order to ensure that forestry rules are observed, it is recommended that the strength of the Forestry Department be increased. (See para 4.43). 5.13 Wind power. geothermal energy. OTEC. and wave energv. Since these sources of energy are still experimental, particularly in the Fijian environment, it is recommended that no major investments be undertaken, but, in order to permit future development, low-priority data collection be undertaken. (See paras 4.42-4.46). - 41 - 5.14 Since Fiji's hvdro resources are being identified and investigated in an adequate and timely manner, no change in the existing programs is recommended. (See paras 3.33-3.35). - 42 - ANNEX 1 FIJI ISSUES AND OPTIONS IN THE ENERGY SECTOR Petroleum Products Consumption - Historical Data Growth rate 1985 1986 1987 1988 1989 1993 per annum 1985-90 INLAND -- ---------------------- MT --__________________ LPG 3,900 4,350 4,350 4,600 5,400 6,372 10.3Z ----------------------- kl ----------------------- LPG 6,783 7,565 7,565 8,000 9,391 11,082 10.3% Avgas 1,323 1,392 1,593 1,663 1,684 1,795 6.3Z Motor Spirit 56,195 56,945 54,382 53,680 57,281 62,183 2.0% Solvent 4,264 4,450 3,275 2,833 2,588 3,231 -5.4% Kerosene 17,643 _9,162 18,269 19,384 21,137 21,551 4.1% ADO 87,423 85,556 84,469 84,962 97,633 106,350 4.0% IDO (To PEA) 5,565 5,963 5,972 6,425 7,702 7,361 5.8% IDO (To Industry) 25,134 35,325 20,442 24,043 19,524 26,424 1.0% IDO (Total) 30.699 41.288 26.414 30.468 27.226 33.785 1.9% IFO 5,830 4,689 4,474 4,055 5,082 6,556 2.4% Lube. 4,237 4,411 4,132 4,399 4,920 5,234 4.3% TOTAL INLAND 214.397 225.458 204.573 209.444 226.942 251.767 3.3% INTNL AV & BUNKERS Jet Al 111,126 110,493 88,860 99,523 108,916 97,116 -2.7% ADO 8,101 9,583 14,312 7,020 5,206 12,539 9.1% IDO 872 6,489 15,199 11,595 9,604 6,310 48.6% IFO 2,580 4,795 5,142 3,830 7,988 8,927 28.2% TOTAL AV/BUNKERS 122.679 131.360 123.513 121.968 131.714 124.892 0.4% TOTAL FIJI 337.076 356.818 328.086 331.412 358.656 376,659 2.2% Source: Mission-estimates based on GOF and oil company statistics. FIJI ISSUES AND OPTIONS IN THE ENERGY SECTOR Petroleum Product s Consumiption - Forecast Forecast 1990-2000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 per annum (actual) INLAND ----_------------------------------------------- MT ---------------------~~~~----------------------- LPG 10.02 6,372 7,009 7,710 8,481 9,329 10,262 11,288 12,417 13,659 15,025 16,527 --------_------------------_ ------------------- kl ----------------------------------------------- LPG 10.02 11,082 12,190 13,409 14,750 16,225 17,847 19,632 21,595 23,755 26,130 28,743 4 Avgas 4.OZ 1,795 1,867 1,941 2,019 2,100 2,184 2,271 2,362 2,457 2,555 2,657 Motor Spirit 3.02 62,183 64,048 65,970 67,949 69,988 72,087 74,250 76,477 78,772 81,135 83,569 1 Solvent 0.0o 3,231 3,231 3,231 3,231 3,231 3,231 3,231 3,231 3,231 3,231 3,231 Kerosene 1.02 21,551 21,767 21,984 22,204 22,426 22,650 22,877 23,106 23,337 23,570 23,806 ADO 4.02 106,350 110,604 115,028 119,629 124,414 129,391 134,567 139,949 145,547 151,369 157,424 IDO (to FE.) 22.72 7,361 12,960 17,393 22,080 26,598 31,313 36,169 41,111 46,278 51,614 57,148 IDO (to Industry) 1.02 26,424 26,688 26,955 27,224 27,497 27,772 28,049 28,330 28,613 28,899 29,188 IDO (Total) 9.82 33.785 39.648 44.348 49.304 54.094 59.085 64.219 69.441 74.891 80.513 86,337 IFO 2.02 6,556 6,687 6,821 6,957 7,096 7,238 7,383 7,531 7,681 7.835 7,992 Lubes 4.02 5,234 5,443 5,661 5,888 6,123 6,368 6,623 6,888 7,163 7,450 7,748 TOTAL INLAND 4.82 251.767 265,485 278.393 291,932 305,698 320,082 335,052 350.579 366.833 383,788 401.506 INTNL AV & BUNKERS Jet Al 0.02 97,116 97,116 97,116 97,116 97.116 97,116 97.116 97,116 97,116 97,116 97,116 ADO 4.02 12,539 13,041 13,562 14,105 14,669 15,256 15,866 16,500 17,160 17,847 18,561 IDO 4.02 6,310 6,562 6,825 7,098 7,382 7,677 7,984 8,304 8,636 8,981 9,340 IFO 4.02 8,927 9,284 9,655 10,042 10,443 10,861 11,296 11,747 12,217 12,706 13,214 TOTAL AVIBUNK 1.02 124.892 126.003 127.159 128.360 129.610 130.910 132.262 133.667 135.129 136.650 138.231 X TOTAL FIJI 3.72 376.659 391.488 405.552 420.292 435.308 450.991 467.314 484.247 501.963 520,438 539.737 Source: hisslon estlmates. - 44 - ANNEX 3 FIJI ISSUES AND OPTIONS IN THE ENERGY SECTOR PEA - VLIS Historical and Forecast System Power System Statistics Total Stn. Use Total Hydro Diesel Load Peak Year Sales 1 Losses Generation Generation Generation Factor Demand (GWh) (2) (GWh) (GWh) (GWh) (2) (MW) Historical (1985-90) Data 1985 269.6 12.6 308.3 62.9 55.9 1986 295.6 12.2 336.6 63.9 60.2 1987 292.8 11.1 329.5 60.6 62.1 1988 304.1 11.0 341.8 63.3 61.6 1989 324.0 11.4 365.7 65.8 63.4 1990 346.6 8.6 383.9 379.24 4.61 64.6 67.3 Projected Base Case (Medium Growth) Scenario (42 GDP Growth) 1991 350.5 9.0 385.2 64.0 68.6 1992 362.6 9.0 398.5 64.0 70.9 1993 375.2 9.0 412.3 64.0 73.4 1994 388.3 9.0 426.7 64.0 76.0 1995 401.8 9.0 441.5 64.0 78.6 1996 415.8 9.0 456.9 64.0 81.3 1997 430.1 9.0 472.6 64.0 84.1 1998 444.9 9.0 488.9 64.0 87.0 1999 460.2 9.0 505.7 64.0 90.0 2000 476.1 9.0 523.2 64.0 93.1 High Growth Scenario (52 GDP Growth) 1991 352.2 9.0 387.0 64.0 69.0 1992 366.3 9.0 402.5 64.0 71.6 1993 381.0 9.0 418.7 64.0 74.5 1994 396.3 9.0 435.5 64.0 77.4 1995 412.3 9.0 453.1 64.0 80.7 1996 429.1 9.0 471.5 64.0 83.9 1997 446.2 9.0 490.3 64.0 87.3 1998 464.1 9.0 510.0 64.0 90.8 1999 482.9 9.0 530.7 64.0 94.5 2000 502.4 9.0 552.1 64.0 98.3 Low Growth Scenario (32 GDP Growth) 1991 348.7 9.0 383.2 64.0 68.2 1992 359.0 9.0 394.5 64.0 70.2 1993 369.5 9.0 405.5 64.0 72.2 1994 380.3 9.0 417.9 64.0 74.4 1995 391.5 9.0 430.2 64.0 76.6 1996 403.0 9.0 442.9 64.0 78.8 1997 414.6 9.0 455.6 64.0 81.1 1998 426.4 9.0 468.4 64.0 83.4 1999 438.7 9.0 482.1 64.0 85.8 2000 451.2 9.0 495.8 64.0 88.3 Sources Mission estImates based on FEA data. -45- ANNEX 4 Page 1 of 2 FIJI ISSUES AND OPTIONS IN THE ENERGY SECTOR ExistinF VLIS Generatina Plants Set Machine make Installed Actual Year No. and type Speed capacity capacity commissioned (RPM) (MW) (MW) Diesel Plants in Western Reaion VUDA T Mirrlees KV16 Major 500 5.75 5.50 1976 2 Mirrlees KV16 Major 500 5.75 5.50 1976 3 Blackstone EVS 8 600 0.37 0.37 1977 NADI 6 Blackstone EVS 8 600 0.30 0.10 1962 7 Mirrlees K6 Maj or 500 1.62 1.60 1968 8 Mirrlees K6 Ma or 500 1.62 1.60 1968 9 Mirrlees K7 Maj or 500 2.20 1.80 1970 10 Mirrlees K7 Ma or 500 2.20 2.20 1972 SIGATORA 2 English Elec. 5SRL 375 0.50 0.50 1951 2 EnRltsh Elec. 5SRL 375 0.50 0.50 1951 3 Ruston 6ATC 600 1.14 1.14 1973 4 Ruston 6ATC 600 1.14 1.14 1974 Total 23.15 21.95 Diesel Plants in Central Region KINOYA F Mirrlees AVSS16 375 5.00 5.00 1970 2 Mirrlees AVSS16 375 5.00 5.00 1971 3 Mirrlees KVSS16 428 2.84 2.84 1966 4 Mirrlees KV16 Major 500 5.07 4.50 1972 5 Mirrlees KV16 Major 500 5.07 4.50 1972 6 Pielstick 14PC3V 428 9.50 6.00 1977 7 Pielstick 14PC3V 428 9.50 9.50 1977 DEUBA T Ruston 7VEB 500 0.25 0.25 1955 2 Ruston 7VEB 500 0.25 0.25 1954 3 Ruston 7VEB 500 0.25 0.25 1961 4 Ruston 6VEBC 600 0.51 0.50 1964 5 Ruston 6VEBC 600 0.51 0.50 1964 6 Niigata 6L28H5 375 0.40 0.40 1979 7 Niigata 6L28H5 375 0.40 0.40 1979 Total 44.54 39.88 Hydroelectric Plants WAILOA /a 1- TIbb(Milano) 750 20.80 20.80 1983 2 Tibb (Milano) 750 20.80 20.80 1983 3 Tibb (Milano 750 20.80 20.80 1983 4 Tibb (Milano) 750 20.80 20.80 1983 Total 83.20 83.20 /a Station peak output limited to approximately 72 MW. Source: FEA. - 46 - ANNEX 4 Page 2 of 2 Existint Generating Plants on the Isolated Systems Set Machine make Installed Rated Year No. and type Sueed capacity capacity commissioned (RPM) (MW) (MW) Rakiraki Power Station 1 Caterpillar 3412 1,500 0.37 0.37 1979 2 Caterpillar 3412 1,500 0.37 0.37 1979 3 Caterpillar 3406 1,500 0.16 0.16 1979 4 Caterpillar 3406 1,500 0.16 0.16 1979 Total 1.04 1.04 Labasa Power Station 1 Ruston 6VCBX Sto be 600 0.23 0.17 1968 2 National }retired 500 0.17 0.15 1940 3 Ruston 6ATC 500 1.14 1.14 1974 4 Eng. Electric SSRL 375 0.50 0.50 1951 5 Ruston 6ATC 500 1.14 1.14 1974 6 Ruston 6ATC 500 1.14 1.14 1974 New Labasa Station 1 Ruston 6ATC 500 1.14 1.14 1972 2 Ruston 6ATC 500 1.14 1.14 1973 Total 6.60 6.52 Savusavu Power Station i Caterpillar 3406 1,500 0.16 0.16 1980 2 Caterpillar 3406 1,500 0.16 0.16 1980 3 Caterpillar 3412 1,500 0.37 0.37 1980 4 Caterpillar 3412 1 500 0.37 0.37 1990 S Mirrlees B/S EV58 660 0.37 0.30 1953 Total 1.41 1.34 Levuka Power Station I Blackstone AV58 0.37 0.37 1958 2 Blackstone AV58 0.37 0.37 1958 3 Rolls Royce GS022 0.30 0.25 1982 4 Rolls Royce GS023 0.30 0.25 1982 5 Rolls Royce GS025 0.30 0.25 1982 Total 1.63 1.48 Source: FEA. ANNEX 5 Page 1 of 3 FIJI ISSUES AND OPTIONS IN THE ENERGY SECTOR Assessment of Power DeveloDment Plans Definitions and AssumDtions The following definitio" and assumptions have been used in the preparation of the Power Developme..t Plans: Installed capacity The nameplate rating of plant and equipment. Capability The maximum loading at which the equipment can be operated continuously, as determined by FEA. System reserve allowance The excess capability that should be available on the system to cater for the non-availability of plant due to maintenance or failure. The FEA reserve allowance for diesel plants is defined as (Capability of largest unit) + r (capability of balance of diesel plant) r - 0.2 for VLIS, r - 0.15 for isolated systems System firm capacity The difference between the total system plant capabilities and the system reserve allowance. Firm diesel energy The energy that a diesel plant will produce operating at 65 percent plant factor for one year. On the isolated systems, a plant factor of 70 percent is applied. Firm hydro-energy The energy that can be produced 95 percent of the time, based upon the hydrological data. Firm hydro capacity The capability with the largest unit unavailable. Note that if the hydro units are selected for peak operation rather than base load, then a higher peak capability for the firm energy available can be achieved. Operation in this manner requires adequate installed hydro capacity and reserve diesel capacity for the amount of peak capacity in excess of that available with the largest hydro unit out of service. Costs All costs are expressed in Fijian dollars at constant 1990 prices. The allocation of foreign and local costs is based on general previous experience, and is not based upon detailed estimates. Pover Develoment Plan - Viti Levu Interconnected System Description 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 LOAD FORECAST Projected Generation GUh 385 399 412 427 442 457 473 489 506 523 Projected Peak Demand VW 68.6 70.9 73.4 76.0 78.6 81.3 84.1 87.0 90.0 93.1 PrAI.ENERGY STATUS Installed CapacitY Diesel capacity (start of year) NW 67.7 67.7 67.7 70.5 70.5 70.5 70.5 70.5 70.5 70.5 Hydro capacity (start of year) NW 83.2 83.2 83.2 83.2 83.2 83.2 83.2 83.2 83.2 83.2 Added diesel capacity NW 2.8 (transferred foam Suva) Total Installed Capacitv NW 150.9 150.9 153.7 153.7 153.7 153.7 153.7 153.7 153.7 1131 CAPACITY Diesel capabillty NW 61.8 65.3 68.1 68.1 68.1 68.1 68.1 68.1 68.1 68.1 1 Flr bydro capability KW 61.0 63.0 64.0 65.0 67.0 68.0 70.0 72.0 72.0 72.0 $> Total Capability Nw 122.8 128.3 132.1 133.1 135.1 136.1 138.1 140.1 140.1 140.1 1 Reserve allowance NW 20.0 21.72 24.2 25.2 27.2 28.2 30.2 32.2 32.2 32.2 System Firm Capacity NW 102.8 106.6 107.9 107.9 107.9 107.9 107.9 107.9 107.9 107.9 YIEH ENERGY FinF diesel ener8g GWh 352 372 388 388 388 388 388 388 388 388 Firm hydro energy GWh 340 340 340 340 340 340 340 340 340 340 Total Firm Enemy CWh 692 712 7728 728 728 728 728 728 728 728 Expected Ceneratlon GWh Expected generation - hydro 367 367 367 367 367 367 367 367 367 367 - diesel 18 32 45 60 75 90 106 122 139 156 N 0 Pht power Develoument Plan - Viti LAeu Interconnected Slstem (Continued) Description 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 COST 5131MB ---------------------------------conotant 1990 F$'000------------------------------------------------- General Inve*t ent Repairs to foundatlons Kinoy 250 Transfer 2.8 I1 diesel frm Sava to Kinoys 250 Subtotal 250 0 250 Q 0 0 0 0 0 0 Other SYtm Invetments Subtrnaislon and distributlon relnforcment expansion and upgradin 6,465 4,842 5,837 2,600 4,090 4,050 3,100 3,960 3,600 3,600 Total Inveatment 6.665 4.842 6.087 2.600 4.090 4.050 3.100 3.960 3.600 3.600 Sources mission eatSatee. OQ 0 -50- ANNEX 6 Page 1 of 2 FIJI ISSUES AND OPTIONS IN THE ENERGY SECTOR Monasavu Reservoir Hydrological/Enerzv Review Description 1. This project is an engineering study to review the energy capability of the Monasavu hydroelectric project reservoir. 2. The study is expected to consist of the investigation of hydrology and water balance of the Monasavu reservoir and simulation studies of the power system to give energy availability estimates and the corresponding probabilities. Obi ectives 3. The objective of the project is to determine the energy availability of the Monasavu hydroelectric scheme. Review of the hydro and thus energy availability has become critical as a result of load growth taking electricity demand above the energy availability estimate use by the Fiji Electricity Authority (PEA) at present. Thet estimate is dated and based on limited information. Fourteen years of collected, and so far unutilized, relevant data exists to review the estimate. 4. Until 1991 the entire load on the FEA interconnected power system was supplied by the Monasavu hydroelectric scheme. Now that the load on the system has risen above the energy availability of the scheme, because of increase in electricity demand, diesel generation at considerably higher cost is required. If the analysis of hydrological data shows the energy capability of Monasavu to be higher than previously thought, diesel generation will be less than previously expected. Thus the potential benefit of the project is to reduce the level of diesel operation and to avoid excessive generatior costs. Notwithstanding the findings of the study, PEA will have more secure knowledge of the capacity available from the Monasavu reservoir. Terms of Reference 5. The energy availability assumptions, and the corresponding probability for the Monasavu hydroelectric scheme are based on derived and limited data. FEA now wish to analyze collected data from the past 14 years and review the energy capability of the reservoir. 6. The consultant will be required to undertake the following work program with all information and data provided by or through FEA: (a) Collection, analysis and review of hydrological data, reservoir levels and electricity production data. The analysis of hydrological data should include rainfall comparisons between Monasavu catchment and Nadarivatu records. - 51 - ANNEX 6 Page 2 of 2 (b) Update of hydrology and generation of streamf lows for Monasavu scheme. (c) Review of operation of Monasavu scheme to confirm diversion factors and water balance for Monasavu reservoir. (d) Simulation studies to produce estimates of the energy/power capability, including probabilities, of the Monasavu reservoir. (e) Submission of report, including databases. 7. The work is expected to be completed within three months at an estimated cost of approximately F$45,OOO. - 52 - ANNEX 7 FIJI ISSUES AND OPTIONS IN THE ENERGY SECTOR Schedule of Import Duties for Petroleum Products (Effective November 21, 1990) Fiscal Duty Customs Duty (F*/l) (Z CIF) MOTOR SPIRITS 33.0 10.0% AVIATION GASOLINE 33.0 10.0% KEROSENE 0.5 0.0 AVTUR 0.5 0.0 ADO 14.0 10.0% IDO 14.0 10.0% IFO 2.5 10.0% SOLVENT 1.5 10.0% PRE-MIX <89 RON 4.0 10.0% PRE-MIX >90 RON 29.0 10.0% LPG (Per kg) 4.0 10.0% Source: PIB. FIji ISSUES AND OPTIONS IN THE ENERGY SECTOR FEA's Past and Proiected Financial Performance Rev Financial Indicators Fiancial Year Ended December 31 1987 1986 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 --------- Audited --------- Eat. ------------------------------------------ Projections ----------------------------------------- Energy Sales (Glb) 310.5 322.9 344.7 366.0 351.4 353.2 355.6 356.8 361.9 374.9 387.9 401.4 415.5 429.9 Energy Sales - I increasa.year -0.3 3.8 6.3 5.8 -4.2 0.5 0.7 0.4 1.4 3.5 3.4 3.4 3.4 3.4 Electricity Sales Revenue (1$a) 46.5 52.5 56.4 65.1 64.6 66.1 67.7 69.1 70.9 73.5 76.1 78.8 81.7 84.5 Average Rvenue (cIkSAh) 15.0 16.3 16.4 17.8 18.4 18.7 19.0 19.4 19.6 19.6 19.6 19.6 19.7 19.7 Ave. Rev. - Constant Prices (Ic/ldh) 17.8 18.4 18.7 19.0 19.4 19.6 19.6 19.6 19.6 19.7 19.7 Ave. Rev. - S increaselyear 5.6 8.5 0.7 8.7 3.4 1.8 1.7 1.8 1.2 0.0 0.1 0.1 0.1 0.0 Ave. Rev. - Index 1990 - 100 100.0 103.4 105.1 106.9 108.7 109.9 109.9 110.0 110.1 110.1 110.2 Net Profitl(Loss) (FSm) (15.0) (2.1) 0.1 6.4 (0.7) (1.9) (4.3) (4.6) (.59) (8.8) (12.7) (18.3) (24.0) (30.1) Debt Service - Interest (FP ) 30.7 29.0 27.0 24.9 28.6 28.4 27.9 26.9 26.5 26.0 25.9 27.0 27.6 27.8 Ln - Principal (1$m) 18.8 21.7 19.8 43.5 26.0 23.1 35.6 38.9 35.2 53.7 48.3 562.8 49.6 42.6 w - Total (F$a) 49.5 50.7 46.8 68.4 54.6 51.5 63.5 65.8 61.7 79.7 74.2 79.8 77.2 70.4 Capital Expenditure (F$m) 7.2 4.9 8.7 14.7 15.3 14.0 13.1 12.3 9.1 12.2 18.6 9.4 9.3 13.9 Total Cash Requireaents (FS.) 56.6 55.5 55.5 83.1 69.9 65.5 76.7 78.0 80.8 91.9 92.8 89.2 86.5 84.3 Internal Cash Generation (CSM) 30.5 36.9 40.9 45.3 44.5 43.4 41.8 41.3 40.5 39.0 36.5 32.2 28.9 24.7 Government Equity (FS.) 3.9 5.0 4.6 5.5 0.8 4.8 1.7 1.0 0.0 0.0 0.0 0.0 C.0 0.0 External Borroving Required (F$P) 23.7 11.0 13.0 29.0 24.6 17.3 33.2 35.8 30.3 53.0 56.3 57.0 57.5 59.6 Cum. Ext. Borrowing Req'd (F$m) 24.6 41.9 75.1 110.9 141.2 194.2 250.4 307.4 364.9 424.6 Cu..ltive Cash Position (F$P) 3.0 0.4 3.3 0.0 0.0 0.0 0.0 -0.0 -0.0 -0.0 -0.0 -0.0 -0.0 -0.0 Rate Base - Revalued (F7$) 372.2 429.7 449.7 479.1 515.1 548.9 580.1 610.5 636.8 660.8 690.1 718.9 744.0 772.1 Rate of Return - Revalued (2) 5.3 6.3 6.0 6.5 5.3 4.6 3.9 3.4 3.0 2.4 1.7 1.0 0.3 -0.5 Self -:nancing Ratio - 3 yr. av. (2.25) (1.99) (0.63) (8.52) (0.69) (0.57) (1.65) (2.13) (1.90) (3.06) (2.81) (3.83) (4.44) (3.94) Sol financing Ratio - Annual (2.66) (2.81) (0.68) (7.49) (0.66) (0.57) (1.65) (2.00) (2.34) (3.33) (2.03) (5.06) (5.21) (3.28) DebL Service Ratio /a 0.7 0.7 0.9 0.3 1.0 0.9 0.8 0.9 0.9 0.9 0.8 0.7 0.7 0.6 Debt Service Ratio lb 0.6 0.7 0.9 0.3 0.9 0.9 0.6 0.7 0.5 0.5 0.4 0.4 0.4 DebtlDebt Plus Equi it 812 692 622 562 522 462 442 432 402 402 392 392 39Z 382 DebtlDebt Plus Equity 822 722 662 612 582 522 502 472 432 422 392 392 392 381 Long-term Funding/Net Yixed Assets 1.1 1.1 1.1 1.2 1.2 1.2 1.1 1.1 1.1 1.1 1.1 1.1 1.0 1.1 Operating Ratio 512 492 522 522 582 612 661 692 722 772 842 902 962 1032 Current Ratio 0.2 0.2 0.2 0.1 0.1 0.1 0.2 0.2 0.2 0.3 0.3 0.3 0.4 0.3 Accounts Receivable - lonthe 0.6 0.7 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 Accounts Payable - Months 0.3 0.3 0.5 1.0 1.0 0.9 0.9 0.8 0.8 0.8 0.9 0.8 0.8 0.8 1 Not Debt Service Requirements. Includes rollover of Bonds and Primissory Notes. cLOSg Term Debt/Loug Term Debt plus Equity. Long Term Debt plus Promissory Notes sLong Term Debt plus Promissory Notes plus Equity. Notes Those projections assume existing tariff (as of February 1991) with no increasesa and uo GOF equity contributions (1991-96). Source: FPA D (Do GO- 0 Profit ad Lo Accont Financial Year Ended Decemer 31 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 200W --------- Audited --------- sEt. ------------------------------------------ Projections ---------------------------------------- Total Geaeration (GUh) 346.9 361.7 385.4 410.3 393.7 395.8 396.5 400.1 405.8 420.4 435.2 450.5 466.3 482.6 Total Purchases cGWb) 2.5 1.5 3.0 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 UDite Gen. & Purchased (GqIb) 349.4 363.2 388.4 412.5 396.0 398.1 400.7 402.3 408.1 422.7 437.5 452.7 468.5 484.8 Station UselLosses (GVh) 38.91 40.34 43.76 46.51 44.53 44.90 45.15 45.50 46.21 47.78 49.56 51.26 53.06 54.88 Poer Sold (GMh) 310.5 322.9 344.7 366.0 351.4 353.2 355.6 356.8 361.9 374.9 387.9 401.4 415.5 429.9 Average Revenue (CentsIkfb) 15.0 16.3 16.4 17.8 18.4 18.7 19.0 19.4 19.6 19.6 19.6 19.6 19.7 19.7 Incom INcRic1ty Sales 46.5 52.5 56.4 54.1 64.6 66.1 67.7 69.1 70.9 73.5 76.1 78.8 31.7 84.5 Other incWO 1.0 0.9 1.4 0.6 0.6 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 Operatina Income 47.5 53.4 57.8 65.6 65.3 66.9 68.5 69.9 71.7 74.3 76.9 79.6 82.5 85.3 ;Lur.Generation - Fuel & Oil 1.5 1.8 2.3 2.6 3.4 3.6 5.4 5.9 7.1 10.0 13.3 17.2 21.6 26.8 Tbermal Genration - Otbhr 1.4 1.5 2.0 1.9 2.3 2.5 3.1 3.5 3.9 4.8 5.8 6.6 7.9 9.2 8ydro Genration 0.2 0.3 0.5 0.6 0.6 0.8 0.8 0.8 0.9 0.9 1.0 1.0 1.1 1.1 Distribution 2.2 2.6 3.2 3.4 3.7 3.9 4.1 4.3 4.5 4.8 5.0 5.3 5.6 5.8 Electricity Purchaset 0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 System Control and Telecom.. 0.6 0.6 0.8 1.0 1.0 1.0 1.1 1.2 1.2 1.3 1.4 1.4 1.5 1.6 Head Offico Enginering 1.0 0.9 1.1 1.8 1.9 2.1 2.2 2.3 2.4 2.5 2.6 2.8 2.9 3.0 Civil Engineering 0.2 0.2 0.2 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.7 0.7 0.7 0.8 Trainin 0.4 0.3 0.4 1.7 0.9 0.9 1.0 1.0 1.1 1.1 1.2 1.2 1.3 1.4 Comercil 0.1 0.1 0.5 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Royalties 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Management and General 3.3 3.8 4.5 4.7 5.7 6.5 6.9 7.2 7.6 7.9 8.3 8.7 9.2 9.6 Insursace 0.9 0.5 0.7 0.8 0.8 0.9 1.0 1.0 1.1 1.1 1.2 1.2 1.3 1.4 Depreciation 12.3 13.0 13.9 15.1 16.4 17.6 18.7 19.9 21.0 22.1 23.5 24.7 25.9 27.3 Total Operatinx Expenses 24.4 26.0 30.3 34.4 37.5 40.6 45.0 48.1 51.7 57.5 64.3 71.4 79.4 88.3 Hot Operating Profit 23.1 27.4 27.5 31.2 27.7 26.3 23.4 21.8 20.1 16.8 12.6 8.2 3.0 -2.9 Nonopersting InCme 0.0 0.0 0.0 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Total 23.1 27.4 27.5 31.7 28.2 26.8 23.9 22.3 20.6 17.3 13.1 8.7 3.5 -2.4 NonRv rati eses RItC drU d UDiVilAoDet 1.6 0.3 0.0 - - - - - - - - - - - RIU Cyclone - Prior Year - - (0.0) RiM Cyclone 6 Flood D a2 0.0 0.0 - - - - - - - - - - - - Aort. of Training Expend. 1.5 - - - - - - - - - - - - - Amort. of SCC oill 0.4 0.4 0.4 0.4 0.4 0.4 0.4 Stock Obsolescence Doubtful Debts 0.1 (0.1) 0.0 Total 3.6 0.6 0.4 0.4 0.4 0.4 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net Profitj(Loss) Before Interest and Financing Charge. 19.6 26.9 27.1 31.4 27.9 26.4 23.6 22.3 20.6 17.3 13.1 8.7 3.5 -2.4 I:> x 0 1h nl Profit and Loss Account cont 'd {r inju.oni FancLs.l Year Ended December 31 1987 19$8 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 . - Audited -- get. --.----------------------------- Projections ----------------------------------------- NmmlaltD iid t 1.6 0.3 0.0 - - . . . . - - - - Ml Cyclone Prior Year . . (0.0) IAN Cyco f lood Dma 0.0 0.0 - - - - - - - - Anon, of Training BZ d. 1.3 - - - - - - - - - Amort. of SCC CoodvS1X 0.' 0.4 0.4 0.4 0.4 0.4 0.4 Stock solescence ' ' ' ' - - - - Doubtful Debts 0.1 (0.1) 0.0 - - - - - - - - - - - 3.6 0.6 0.4 0.4 0.4 0.4 0.4 0.0 0.0 0-. 0.0 0.0 0.0 0.0 Net Profitl(Loee) Before. Interest and Financig Charses 19.6 26.9 27.1 31.4 27.9 26.4 23.6 22.3 20.6 17.3 13.1 8.7 3.5 -2.4 PiRtaWH rest Paymnt 30.7 29.0 27.0 24. 28.6 28.4 27.9 26.9 26.3 26.0 25.9 27.0 27.6 27.0 (Less) Snterest CapitaUse d 0.4 0.o0 00 0.0 0.0 0.0o 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Intorest Cbaaend to Operations 30.3 29.0 27.0 24.9 28.6 28.4 27.9 26.9 26.5 26.0 25.9 27.0 27.6 27.8 Net Profit (Lose fter Snterest Latore rn ncIna names (10.7) 12.1) 0.1 6.4 (0.7) (1.9) (4.3) (4.6) (5.9) (8.8) (12.7) (18.3) (24.0) (30.2) Iii c. wagLies Princial -I (0.3) - - - - - - - - Real. Zxcb. Losses - Interst 1.3 _ _ . . . . _ _ _ _ - - _ Unreal. for. Ezch. LossslIMn e) - 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (0.1) NIet Prof itlALo|) t4fora notirFofitn rvsei (11.9) e2.1) 0.4 6.4 (0.7) (1.9) (4.3) (4.6) (5.9) (8.8) (12.7) (18.3) (24.0) (30.1) Transfer tol(from) Reserves - - 0.3 Net Profiti(Lose) for the Year (15.0) (2.1) 0.1 6.4 (0.7) (1.9) (4.3) (4.6) (5.9) (8.8) (12.7) (18.3) (24.0) (30.1) lot Base (Ave. Rev. Net Yd Assets) 372.2 429.7 449.7 479.1 515.1 548.9 580.1 610.5 636.8 660.8 690.1 718.9 744.0 772.1 Rate of Return (net Opg. ProfitlRate, Bses) 1 5.32 6.3X 6.02 6.52 5.31 4.62 3.92 3.4U 3.02 2.42 1.n 1.02 0.3S .0.52 /i A rate of return of 8 percent has been covenanted. Note* Thee projctions assme existing tariff (cs of February 1991) with no increases and no GDP equity contributions (1991-96). Sources FEA. 0tc UO Balance, Sheet %o Ul"on) lnacil Tear ndd Dcember 31 1S87 198S 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 .- Audited --------- et. -----________- Projectioe ------------------------------------ Fixed Assets Gross fed Asst o ln Oper. 511.3 542.0 578.2 629.9 681.8 731.4 760.4 830.9 874.0 921.9 978.2 1,027.6 1,078.9 1,137.0 (LeoS) DePreciation 90.5 103.5 117.4 132.5 148.9 166.4 185.2 205.1 226.1 248.2 271.7 296.3 322.2 349.5 Net Fied Asese In Operation 421.0 436.S 460.6 497.4 532.9 565.0 595.2 625.8 647.9 673.7 706.5 731.3 756.7 787.5 et Nonoperstin Assets 1.3 1.2 0.8 0.8 0.8 0.8 0.8 0.8 0.6 0.8 0.8 0.8 0.8 0.8 Work in Progroes 7.3 7.0 8.4 8.4 8.4 8.4 6.4 8.4 8.4 8.4 8.4 8.4 .4.4 Total Fixed Assets 429.6 445.7 470.0 506.6 542.0 574.2 604.4 635.0 657.0 682.9 715.7 740.5 765.9 796.6 laonstmsnts 4.2 5.5 6.6 6.0 3.7 3.1 3.4 2.0 2.2 2.4 2.6 2.8 2.9 3.1 Current Assets raseat *iT erand In band 2.3 (0.2) 2.5 (0.0) 0.0 0.0 (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) Inventories 6.6 7.6 8.3 8.8 9.3 9.8 10.4 11.1 11.7 12.4 13.2 14.0 14.8 15.7 Accountt Receivable Elect. 2.2 2.9 3.4 3.2 3.2 3.3 3.3 3.4 3.5 3.6 3.8 3.9 4.0 4.2 Accounts eceivalte . Other 0.3 0.7 1.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Prepay tents sTI iFhrr Debtors 0.7 0.5 1.1 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 I Total Current &t -ic 12.1 11.4 16.4 13.3 13.8 14.4 15.1 15.8 16.5 17.3 18.2 19.1 20.1 21.1 L Other Assets 0aC lOtherglAset 2.1 1.8 1.4 1.1 0.7 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Prepsymente 0.5 0.4 0.3 0.3 0.4 0.4 0.5 0.5 0.4 0.4 0.4 0.4 0.4 0.4 Deferred Unreal Exob. Losses Total Assets I" 465.9 494.7 527.2 560.7 592.4 623.3 653.3 676.2 703.0 736.9 762.6 789.3 821.3 Total EquitY. Reserves and Liabilities Covernnt Equity 58.5 62.5 66.1 71.6 72.4 77.2 78.8 89.8 79.8 79.6 79.8 79.8 79.8 79.8 Retaind Carnins (12.3) (14.4) (14.3) (7.8) ;6.5j (10.5) (14.8) (19.4) (25.3) (34.1) (46.8; (65.1) (89.1) (119.2) Reserves 6.3 8.5 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 Revaluation Reserve 21.4 66.2 92.0 114.8 146.0 181.8 217.7 255.9 269.8 325.6 363.3 403.3 445.3 489.8 Total Equity and Reserves 73.9 122.6 154.4 189.1 220.4 259.0 292.3 326.9 354.8 381.8 406.8 428.6 466.6 460.9 Lonz Term Debt 312.0 273.8 253.6 236.6 240.0 220.7 230.0 244.1 235.7 255.4 261.8 269.2 283.9 277.4 current Lisabilitie Iroutesorv iiots 26.2 37.1 50.0 63.0 63.0 63.0 63.0 48.0 33.0 18.0 3.0 0.0 0.0 0.0 .radc Creditors 0.6 0.7 1.3 2.8 3.0 3.1 3.3 3.4 3.3 4.0 5.0 4.7 5.2 6.2 Other Creditors nd Accounts 9.5 8.1 8.4 5.6 6.2 6.2 6.1 5.9 5.9 5.8 5.7 5.9 6.1 6.1 Cosumer Deposits 0.9 0.9 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 Loans du ithin one year 22.0 19.2 22.4 25.1 23.1 35.6 23.9 20.3 38.7 33.3 49.8 49.6 42.8 65.9 Total Current Llabillties 59.3 66.0 83.4 97.8 96.7 109.2 97.6 76.8 82.1 62.4 64.8 61.6 55.4 79.6 Otber Liabilities consuaer upoes 3.4 3.3 3.5 3.5 3.5 3.5 3.5 3.5 3.S 3.5 3.5 3.5 3.5 3.5 Total Eqult,. Rs. and Lilb. 448.6 465.9 494.8 527.2 560.6 592.4 6523.4 653.3 6767.2 703.1 736.9 762.6 789.4 821.3 Debt/Debt plus Equity la 60.92 69.02 62.2X 55.62 52.12 46.0X 44.02 42.8S 39.92 40.1X 39.22 38.62 36.92 37.62 DcbtlDebi plus Equity P 82.12 71.72 66.32X 61.32 57.91 52.32 50.12 47.22 43.12 41.72 39.42 38.62 38.92 37.62 P3 I 8st Debt Service Requiremnts. ml a Includes rollover of Bonds and Pro.ijsory Notes. 4X Notes These projection*s to-- eixstin tariff (as of February 1991) witb no lncreases, and no ODf equity contrlbutions (1991-96). 0 00 Sources E. h Source and Aailcation of Fumds Stat t MlP UUtlOUl FVinncSal lear 4ne December 31 1967 196 1989 1990 1991 1992 199 1m4 193 19 1997 1998 1999 2000 A- udited - - et. .- ---.-------------------- - ----------- Projections -------------------------------------- Internal Cash Generation amt rrozLgtaaons) Detore Later, end Financing Chargo 19.6 26.9 27.1 31.4 .27.9 26.4 23.6 22.3 20.6 17.3 13.1 6.7 3.5 -2.4 Dopreciatn 12.3 13.0 13.9 15.1 16.4 17.6 16.7 19.9 21.0 22.1 23.5 24.7 25.9 27.3 Otbr non-rh Item 2.6 1.2 2.3 0.4 0.4 0.4 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Ovaratins Casb f1w 34.5 41.1 43.3 46.6 44.6 44.3 42.7 42.3 41.6 39.4 36.6 334 29.4 24.9 (Less) Voring Capital Incr. 1.4 3.3 1.3 0.6 (0.4) 0.6 0.6 0.8 0.9 0.3 (0.1) 1.0 0.3 (0.0) (Less) Consumer Deposits 0.6 (0.3) 0.1 - - - - (Loee) Slinkg Fund Ivestnnt 2.1 1.2 1.1 0.9 0.4 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Cash Avail. for Debt Service 30.3 36.9 40.9 45.3 44.5 43.4 41.8 41.3 40.5 39.0 36.5 32.2 26.9 24.7 Debt Services teroct _ occal _ _ 12.6 19.5 20.7 21.7 22.3 23.0 23.6 24.3 25.9 26.7 27.5 Interest - Oeresse 30.7 2S.0 27.0 12.1 9.1 7.7 6.2 4.6 3.5 2.4 1.6 1.1 0.6 0.3 principal - Local Lo - - - 91.7 0.5 3.7 5.6 6.7 7.1 7.7 10.8 12.2 12.4 10.6 PrIncipal - Local lods 4.0 0.0 0.0 1.5 6.0 0.0 10.5 3.3 0.0 21.9 16.3 33.2 34.3 30.3 Prilcpal - Orerco a 14.8 21.7 19.8 37.3 19.5 19.3 19.3 13.9 13.1 3.0 6.2 4.4 2.9 1.7 Promiscory Notes Repaid 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.0 15.0 15.0 15.0 3.0 0.0 0.0 Total Debt Service 49.5 50.7 46.E 1565.4 54.6 51.5 63.5 65.6 61.7 79.5 73.2 79.8 77.2 70.4 Cast Avail. from Onerotlone (19.0) (13.6) (5.9) (110.1) (10.1) (8.0) (21.7) (24.5) (21.2) (40.7) (37.7) (47.6) (48.3) (43.7) IIk3 "it I' vect_nt 7.2 4.9 8.7 14.7 15.3 14.0 13.1 12.3 9.1 12.2 16.6 9.4 9.3 13.9 folamce to be Finane9d 26.2 16.7 14.7 124.6 25.4 22.0 36.8 36.7 30.3 33.0 56.3 57.0 57.5 59.6 Sources of Finance ovriment CZ rti[ Equity 3.9 5.0 4.6 5.5 0.6 4.8 1.7 1.0 0.0 0.0 0.0 0.0 0.0 0.0 Intomnat. Lending Agency Loans 2.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Sfinkig Fund Rsdsption 4.0 0.0 0.0 1.5 2.7 1.0 0.0 1.5 0.0 0.0 0.0 0.0 0.0 0.0 lend sues - . - Proeiarry Notes 17.2 10.9 12.9 13.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Otbhr Loas 0.0 0.0 0.0 101.6 21.9 16.3 33.2 34.3 30.3 53.0 56.3 57.0 57.5 59.6 Decreoses In Propayment 0.1 0.1 0.1 . - - - - - - - - - - Total Finance 27.26 16.0 17.6 121.5 25.4 22.0 34.6 36.7 30.3 53.0 56.3 57.0 57.5 59.6 C*ab Inc. (Decr.) for lear 1.4 (2.7) 2.9 (3.3) 0.0 0.0 (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) Opening 8slance 1.6 3.0 0.4 3.3 (0.0) 0.0 0.0 (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) Closing Bolanc- 3.0 0.4 3.3 (0.0) 0.0 0.0 (0.01 S°.O) (-.01 (0.0) (0.0) (0-0) tO.0) (0.0) Self Financing Ratio - 3-yr ave. -2.2 -2.0 -0.6 -6.5 -0.7 -0.6 -1.7 -2.1 -1.9 -3.1 -2.6 -3.6 -4.4 -3.9 Solf finanin Ratio . nnual -2.7 -2.8 .0.7 -7.5 .0.7 .0.6 -1.7 -2.0 -2.3 .3.3 -2.0 -5.1 -5.2 -3.3 Debt Service Ratio In 0.7 0.7 0.9 0.2 1.0 0.9 0.6 0.9 0.9 0.9 0.8 0.7 0.7 0.6 Debt Service Rati°o 0.8 0.7 0.9 0.3 0.9 0.9 0.7 0.6 0.7 0.5 0.5 0.4 0.4 0.4 Net Debt Service Rquiremets. E Includes rollover of 2ondc and Promissory Notes. Notes Thecs projections ascu_m exittng tariff (so of February 1991) with no inr ease, and no GDF equity contributions (1991-96). Soures In. 12*. x VI 0D 0 I.:' Vi - 58 - FIJI ISSUES AND OPTIONS IN THE ENERGY SECTOR Statistical Appendix Table 1 FIJI: SELECTED DEVELOPMENT INDICATORS Table 2 FIJI: SELECTED PROJECTIONS Table 3 FIJI: ENERGY BALANCE, 1990 (ORIGINAL UNITS) Table 4 FIJI: ENERGY BALANCE, 1990 ('000 TOE) Table 5 FIJI: PETROLEUM MARKET SALES AND IMPORTS, 1985-1990 Table 6 FIJI: NATIONAL PUBLIC ELECTRIFICATION SYSTEM Table 7 FIJI: ELECTRIFICATION PERFORMANCE INDICATORS, 1990 Table 8 FIJI ELECTRICITY AUTHORITY TARIFF STRUCTURE - 59 - TABLE 1 FIJI: SELECTED DEVELOPMENT INDICATORS 1985 1986 1987 1988 1989 1990 GTDP (million F$)1 | 1,178 1,326 1,310 1,377 1,755 1,726 Per capita (F$) 1,691 1,855 1,835 1,915 2,431 2,381 Total Imports2 (million F$) 508 494 463 655 944 na Total Exports3 (million F$) 272 313 407 515 583 na Inflation Rate4 4.4 1.8 5.7 11.9 6.1 7.9 Exchange Rate5 (F$/US$) 1.15 1.15 1.23 1.42 1.48 1.40 Sea Area (100 sq. km) 2,300 Land Area (100 sq. km) 183 Wage & Salary Employment6 ('000s) 81,100 79,800 78,200 77,700 88,200 89,000 Ave. Wage & Salary7 (F$/hr) 1.49 1.49 1.57 1.55 na na Total Population8 ('000s) 697,000 715,000 714,000 719,000 722,000 725,0009 Urban1o (%) 39 39 39 39 39 39 Overseas Development Assistance Annual ODA ('000 F$)" 36,685 48,875 33,456 38,913 50,742 na Multilateral ('000 F$) na na 2,227 12,602 13,082 na Bilateral ('000 F$) na na 31,229 26,311 37,660 na % Bilateral na na 93 68 74 na ODA (% GDP) 31.1 36.9 25.5 28.3 na na ODA (% Current Govt. Income) na na na na na na ODA/Capita (F$) 53 68 47 54 70 na Sources: Current Economic Statistics (October 1990). UNDP Development Co-operation Reports. Mission Estimates. Notes: (1) Current prices from Current Economic Statistics (October 1990). Value for 1990 estimated, using a growth rate of 4%. (2) CIF actual figures from CES. (3) FOB actual figures from CES. (4) Based on 1985 CPI= 100. 1985 rate based on 1979 CPI = 100. From CES. (5) Average throughout the year from CES. (6) Mid-year. (7) Mid-year estimates. (8) Based on 1975 and 1980 Census data adjusted to mid-year. (9) Mission estimate using annual growth rate of +OA%. (10) Main FEA Electrified Areas. Non Census years estimated. (11) 1987-89 figures from Development Co-operation Reports. - 60 - TABLE 2 FIJI: SELECTED PROJECTIONS 1990 1995 2000 Population1: urban 282,750 291,720 303,030 rural 442,250 456,280 473,970 Total 725,000 748,000 777,000 GDP (million US$)2: high growth (5%) 1,233 1,574 2,009 med. growth (4%) 1,233 1,500 1,825 low growth (3%) 1,233 1,430 1,657 GDP/Capita3: 1,701 2,006 2,349 Electricity Generation (GWh)4: with EGM 408 414 505 without EGM 408 480 572 Fuel Consumption (kl): Gasoline 62,183 72,087 83,569 Kerosene 21,551 22,650 23,806 ADO 106,350 129,391 157,424 IDO 33,785 na na IFO 6,556 7,238 7,992 Lubes 5,234 6,368 7,748 Avgas 1,795 2,184 2,657 Solvent 3,231 3,231 3,231 LPG 11,082 17,847 28,743 Total Inland 251,767 260,996 315,170 Total Av/Bunkers 124,892 130,910 138,231 Total Fiji Trade 376,659 391,906 453,401 Source: MIssion Estimates Notes: (1) Mission estimates from 1986 (.ensus, assuming population growth approximately 3%. Urban population approximately 39% of total. (2) 1990 data estimated from 1989 actual using a GDP growth of 4%. (3) Assuming a medium growth scenario. (4) Includes power purchased from Fiji Sugar Corporation. (5) Emperor Gold Mines' service with FEA uncertain past 1991. TABLE 3 FIJI: ENERGY BALANCE, 1990 (Original units) Fuel Bagasse3 Coconut Total Total Petroleum Total wood2 Residues Biomass Hydro Electricity Gasoline JetAl Kerosene ADO IDO IFO Avgas LPG Petroleum (tonnes) (tonnes) (tonnes) (tonnes) (GWh) (GWh) (ki) (ki) (kl) (U) (kl) (kl) (ki) (kl) (kl) Primary Supplies: Production 736.S90 1.045.078 74.905 1.856.573 379 Imports 0 62.183 97,116 21,551 118.889 39,203 15,483 1,795 11.082 367,302 Bunkerin2iExports 0 (97.116) (12.539) (6.310) (8.927) (124.892) GROSS AVAILABLE 736,590 1,045,078 74.905 1.856.573 379 62.183 0 21,551 106.350 32.893 6,556 1,795 11.082 242,4t10 Conversion: Power Generation1 (4.630) (69,800) (74,430) (379) 497 (7.108) (7,108) Station use 0 (6) 0 Trans./Distrib. Losses 0 (43) 0 NET SUPPLIED 731,960 975.278 74.90S 1,782,143 0 448 62,183 0 21.551 106.350 25.785 6.556 1,795 11,082 235.302 Final Consumption: Households 306,960 65.635 372,595 70 21,551 8,209 29,760 Transport 0 62.183 93.056 1,795 157,034 Government/Commercial 25.000 25.000 136 1,437 1,437 Industrial 0 154 13,294 25.785 6,556 1.437 47,072 Agro-industries 400.000 975,278 9,270 1.384,548 88 0 Others 0 0 TOTAL 731,960 975.278 74.905 1,782.143 448 62.183 0 21.551 106.350 25,785 6,556 1.795 11.083 235.303 Sources: Mission Estimates. Fiji Sugar Corporation (March 1991). Ministry of Primary Industries (1991). Fiji Department of Energy(1990 Survey of Industries). BP, Sbell, Mobil (1991). Fiji Electricity Authority (1991). Notes: (I) FEA generation at 405 GWh. FSC generation from bagasse at 46 GWh. Assume other generation mainly from fuelwood at 47 G Wh. (2) Mission estimates used for indusriaUVcommercial production, power generation and consumption of fuelwood. Household fuelwood consumption estimated based on urban consumption of 146 kg/cap and rural consumption of 600 kg/cap as follows: Urban = (725,000)(38.9%)(146) = 41,175,650 kg = 41,175 tonnes Rural = (725,000)(61.1%)(600) = 265,785.000 kg = 265,785 tonnes Total Housebold consumption = 306,960 tonnes Govt/Commercial consumption is estimated at 25,000 tonnes from a 1989 Survey conducted by Fiji Dept. of Energy of commercial users. (3) Bagasse production and consumption from 1990 FSC figures. TABLE 4 FIJI: ENERGY BALANCE, 1990 ('OOOTOE) Fuel Bagasse3 Coconut Total Hydro Total Petroleum Total Total wood2 Residues Biomass Electricity Gasoline JetAl Kerosene ADO IDO IFO Avgas LPG Petroleum Energy Primary Supplies: Production 309.4 198.6 24.7 532.7 94.8 0.0 627A Imports 50.2 85.3 18.5 106.0 37.8 15.3 1.4 6.6 321.1 321.1 Bunkerin2/Exports -85.3 -11.2 -6.1 - 8.8 -111.4 -111.4 GROSS AVAILABLE 309.4 198.6 24.7 532.7 94.8 0.0 50.2 0.0 18.5 94.8 31.7 6.5 1.4 6.6 209.7 837.11 Conversion: Public Power Generation -1.9 -13.3 -15.2 -94.8 116.8 -6.9 -6.9 -0.0 Transformation Losses 0.0 -74.8 0.0 -74.8 Station use 0.0 -0.5 0.0 -0.S I TransJDistrib. Losses 0.0 -3.6 0.0 -3.6 (h NET SUPPLIED 307.4 185.3 24.7 517A 37.9 50.2 0.0 18.5 94.8 24.9 6.5 1.4 6.6 202.8 758.211 Final Consumption: Households 128.9 21.7 150.6 5.9 18.5 4.9 23.4 179.9 Transport 0.0 50.2 83.0 1.4 134.6 134.6 Government 10.5 10.5 11.5 0.9 0.9 22.8 Commercial 0.0 13.1 11.9 24.9 6.5 0.9 44.1 57.1 Agro-industries 168.0 185.3 3.1 356.4 7.4 0.0 363.8 Others 0.0 0.0 0.0 TOTAL 307.4 18S.3 24.7 517.4 37.9 50.2 0.0 18.5 94.8 24.9 6.5 1.4 6.6 202.8 -758.2 i Sources: Mission Estimates (February 1991). Fiji Sugar Corporation (March 1991). Ministry of Primary Industries (1991). Fiji Department of Energy (1990 Survey of Industries). BP, Shell. Mobil (1991). Fiji Electricity Authoritv (1991). Notes: (I)FEA generation at 405 OSWh. FSCgenerationfrom bagasse at 46 GWb. Assume other generationmainly from fuelwood at 47 GWb. (2) Mission estimates used for indusriaUcommercial production, power generation and consumption of fuelwood. Household fuelwood consumption estimated based on urban consumption of 146 kg/cap and rural consumption of 600 kg/cap as follows: Urban = (725,000)(38.9%)(146) = 41,175.650 kg = 41.175 tonnes Rural = (725,000)(61.1%)(600) = 265.785,000 kg = 265.785 tonnes Total Household consumption = 306,960 tonnes GovtlCommercial consumption is estimated at 25,000 tonnes from a 1989 survey conducted by Fiji Dept. of Energy of commercial users. (3) Bagasse production and consumption from 1990 FSC figures. TABLE 5 FIJI: PETROLEUM MARKET SAIES AND IMPORTS, 1985-1990 1985 1986 1987 1988 1989 1990 Sales Import Import Sales Import Import Sales Import Import Sales Import Import Sales Import Import Sales Import Import Volume Volume Value Volume Volume Value Volume Volume Value Volume Volume Value Volume Volume Value Volume Volume Value (kI) (ki) (MOFS) (ki) (kl) COOO1S) (kl) (kl) ('OOOFS) (kl) (ki) ('OOOF$) (kl) (ki) (OOOFS) (kl) (ki) ('OOOFS) Product: Gasoline 56.195 79,900 22,511 .56,945 79,300 14,507 54,382 9,300 20,225 53,680 66,400 13,916 57,281 73,000 18,820 62,183 62,183 19,284 Jet Al 111,126 139,700 37,919 110,493 1.4,000 27,114 88,860 84,000 17,734 99,523 152,700 30,913 108,916 155,600 41,766 97,116 143,700 39,561 Kerosene' 17,643 13,600 3,602 19,162 23,300 4,002 18,269 29,000 5,878 19,384 9,100 1,889 21,137 16,300 3,220 21,551 16,000 3,578 ADO 87.423 130.400 32316 85,556 134,500 20,610 84,469 106,900 21,719 84,962 132,300 26,341 97,633 145,900 35,224 106,350 143,200 36,679 IDO 30,699 36,700 8,904 41,288 49,200 7,304 26,414 41.600 7,672 30,468 50,20 9,344 27.226 5,000 11,674 33,765 42,400 10,139 IFO 5,830 10,800 2,401 4,689 6,500 700 4,474 8,500 9,166 4,055 9,290 1,193 5,082 13,100 2,214 6,556 11,200 2,286 Lubes 4,237 3,800 3,202 4,411 4,000 3,402 4,132 4,300 4,085 4,399 6,200 4,672 4,920 7,400 4,931 5,234 8,100 4,970 AvgasJAvtur 1,323 1,392 1,593 1,663 1,684 1.795 Sohlents 4,264 4,450 3,275 2,833 2,588 3,231 LPG 6783 7,i5 7.565 81000 9.391 11082 0 Total InlandTrade 325,523 414,900 110,855 335,951 450,800 77,639 293.433 366,600 86,479 308,967 426,100 88,267 335,858 461,300 117,849 348,883 426,783 116,497 Bunkes: JetAl 111,126 110,493 88,860 99,523 108,916 97,116 Avgas/Avtur 62,800 19,603 na na 92,600 24,046 101,200 29,092 111,900 44,453 113,700 43,823 ADO 8,101 8,200 2,337 9,583 9,600 1,692 14,312 7,400 1,849 7,020 7,200 2,036 5,206 6,500 2,323 12,539 5,000 1,793 IDO 872 900 251 6,489 6,500 1,110 15,199 16,300 3,697 11,595 9,300 2,458 9,604 9,600 3,317 6,310 10,300 3,448 IFO 2580 3300 84 4.7 48 5 5142 30 4600 7988 8300 927 7000 2,0 Total Bunkers 11,553 75,200 23,035 20,867 20,900 3,396 34,653 121,900 37,020 22,445 122,300 34,433 2Z798 136,300 52,169 27,776 136,000 51,064 Total Trade 339,700 87,821 429,900 74,243 244,700 49,458 303,800 53,835 325,(= 65,680 290,783 65,432 Sources: Mission Estimates (February 1991) Sales volumes obtained from MobiL Shell BP, Fijips statistics Import volumes from Department of Energy. Notes: (1) Includeslet Al. - 64 - TABLE 6 FIJI- NATIONAL PUBLIC ELECTRIFICATION SYSTEM 1985 1986 1987 1988 1989 1990 Consumers': Commercial/Industrial 8,096 8,321 8,025 8,000 8,282 8,908 Domestic 47,010 50,656 52,783 55,559 57,968 62,229 Street Lights 73 75 76 76 79 79 Institutional 947 1,028 1,074 1,135 1,199 1,282 Total 56,126 60,080 61,9581 64,770 67,528 72,498 Capacity (MW): Installed hydro 83 83 83 83 83 83 Installed diesel2 791 75 74 76 66 77 Total 163 159 1581 159[ 150 160 [Firm Hydro [ 62[ 621 62 621 62[ 62 Firm Diesel3 [ 551 5S3 na 54 421 67 [FirmTotal 1181 1151 621 1161 105 129 [ Max Demand~ [ 561[ 60] 62] 621 631 671:~ Output (MWh): _ Generation Hydro 303,820 331,884' 329,647 340,298 365,615 379,240 Generation Diesel 18,505 19,691 17,284 21,156 19,826 26,073 PEA Total GDeration 322,32.5 351,575 346,931 361,454 385,441 405,313 Purchases from Industry' 2,765 2,938 2,483 1,469 3,004 3,005 Station usage 3,710 4,531 4,342 3,901 4,857 4,863 Total sent out 321,380 349,982 345,072 359,022 383,588 403,455 Total Losses 36,345 38,513 34,569 35,417 38,900 34,513 Net Consumption6 285,035 311,469 310,503 323,605 344,688 368,942 Sources: FEA Annual Reports. FEA Tariff Study (April 1991). Mission Estimates (February 1991). Notes: (1) Listed by tariff group, based on FEA Tariff Study. (2) Includes diesel sets installed at Rakiraki, Savusavu, Labasa and Levuka. (3) Calculated as "site ready capacity" at all FEA stations. (4) For Viti Levu Interconnected System (VLIS) only. (5) Fiji Sugar Corporation (FSC). (6) Includes sales and losses for FEA as a whole. - 65 - TABLE 7 FIJI: ELECTRIFICATION PERFORMANCE INDICATORS,, 1990 FIJI ELECTRICITY AUTHORITY (FEA) Fixed Assets (million F$) 479.1 Average Revenue (Fe/kWh) 17.8 Average Cost (Fe/kWh) Capital 6.2 Fuel 0.6 Other operating 8.4 Estimated ROI (%) 6.5 Fuel Consumption3 (V/kWh) Main system 0.3 Outer islands 0.3 Households Electrified4 (%) 45.0 kWh/year/consumer5 5,946 kWh/year/employee 388,910 Employees/MW installed 6.5 Outages Number 368.0 Ave. duration (hrs) 2.4 Voltage drop/increase na Sources: FEA Tariff Study (April 1991). Mission Estimates. FEA Unplanned Outage Statistics for 1990 (April 1991). Notes: (1) 1990 except where indicated. (2) Rate of Return on Revalued fixed assets. (3) Automotive diesel oil (ADO) only. (4) Percentage of total national population. (5) Electricity generation. (6) Generation, Transmission and Distribution on Viti Levu Interconnected System. FEA outage statistics. - 66 - TABLE 8 FIJI ELECTRICITY AUTHORITY TARIFF STRUCTURE 1/ , 1. Domestic Tariff All units at 22.51 (20.46) cents per unit (kWh). Minimum charge of $ 4.51 ($ 4.10). 2. Commercial and Industrial Tariff All units at 23.72 (21.56) cents per unit. Minimum charge of $ 9.48 ($8.62). 3. Maximum Demand Tariff Demand charge: $ 19.60 ($ 17.82) per kilowatt per month Energy charge: 15.25 (13.86) cents per unit Maximum demand meters will be reset after the meter reading for that month. Note: Available on application to all commercial and industrial consumers with a maximum demand in excess of 75 KW. Minimum charge $ 1,470.00 ($1,336.50). 4. High Voltage SupRly For maximum demand and commercial and industrial consumers who elect to take a supply at high voltage direct from the Authority's mains, a reduction of 4Z in the monthly accounts on this tariff will be allowed. 5. Reactive kVarh Tariff 14.04 (12.76) cents per unit. Note: Consumers are required to maintain a power factor of not less than 0.85 and the Authority reserves the right, if a consumer's power factor as determined by the Authority's recording instruments is less than 0.85, to charge for all excess reactive units of kVarh at (14.04) 12.76 cents per unit. This charge for reactive units will be in addition to the charge for ordinary kWh units used. As of August 1,. 1991. The old rates are shown in parentheses. - 67 - 6. Institution Tariff 22.51 (20.46) cents per unit. For premises used wholly or principally as: (i) Private schools owned and operated by a Management Board. (ii) Churches, temples and mosques. 7. Street Light Tariff 18.15 (16.50) cents per unit. 8. SRecial Discount Special discounts may be negotiated with consumers supplied on the Maximum Demand Tariff who can comply with the following conditions: (i) Manufacturing industry. (ii) Regularly consuming a minimum of 200,000 units each month between the hours of 9:30 p.m. and 6:00 a.m. (iii) Willing to accept an interruptible supply. (iv) Any discount negotiated will include the high voltage supply discount where supply is taken at high voltage. This map has been prepored by 1719 The World Sank's stoff exclusively for the convenience of readers and is exclusively for the internal use of The World BSnnk Group. The denominations used and the boundories shown Novukembu on this map do not imply, on the port of The World Sank Group. ony judqment on the legal zlats of any territory or any N O R T H E R N endorsement or acceptonce ot such boundaries. z NODOGO Vunimako Ko ruli Moloke 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ O V A N UA L U VNakrambo t) NasiprovwonQc( ;-'^-'' Ndrekeniowi0 Korolevy M O _uMbuos SOVUovusov C, ~~~~~~~~~~~~~~~~~~~~YAOUA Noweni O Y^DUA AN~~~~~~~~~~~~ ~~~~doma loniNte bV \ r?' e C Nabouwolu NAVy? WAYA KORO \ Vu % _ (^ ~~~~~~~~~~~~~~~./ OV'ALAU =tx;s~~~~~~Na~~~nukuknsvnu z I ~~~o ~~o ~b Uo ~~~~~~~~~~~~~~~~~~~~~~~~so C ie's tie.w t 0 1~~~~~~~~~~~~~~~~~~~0 203045 JLJ wo IATULEE OV,A 17P W~~~~~~~~~~~~~~~~~~~~~~~ia t. t0 ' 18e.u l §~~~~~~~~~~ ON T I SUr RnAiL Iu 1.ADVjNW The map on the cover of this report has been prepared by the World Bank's staff exclusively for the convenience of readers. The boundaries shown on the map do not imply, on the part of The World Bank Group, any judgement on the legal status of any territory or any endorsement or acceptance of such boundaries. Industry and Enargy Operations Division Country Department III East Asia and Pacific Region World Bank Washington, D.C., U.S.A.