Evaluation of Rural Electrification Concessions in sub-Saharan Africa Detailed Case Study: Mali Report to World Bank December 2015 Copyright World Bank. All rights reserved. Report prepared by Castalia Limited, a part of the worldwide Castalia Advisory Group. Table of Contents Executive Summary Error! Bookmark not defined. 1 Introduction 1 2 Mali Background 2 2.1 Power Market Structure 4 2.2 Rural Electrification Approach 10 3 Mali’s Rural Electrification PCASER Concessions 15 3.1 Stages of Development 16 3.2 Operations and Management 16 3.3 Financing Arrangements 17 3.4 Contractual Arrangements 17 3.5 Technological Approach 18 3.6 Regulatory Arrangements 19 4 Assessment of Concession 20 4.1 Evaluating Success of Concession 20 4.1.1 Access 20 4.1.2 Quality of service 21 4.1.3 Sustainability 21 4.1.4 Efficiency 21 4.1.5 Other Impacts 21 4.2 Arrangements that Could Have Delivered Better Results 22 4.3 Reasons for Results 22 4.4 Replicability of Experience and Success 23 4.5 Lessons for Future Concessions 23 Appendices Appendix A : Small Concessionaire Summary – KAMA 24 Appendix B : List of PCASER Projects 31 Tables Table 2.1: Mali Summary Statistics 2 Table 3.1: Private Operators with Operations in more than 20 Municipalities 15 Table 3.2: Stages of Development of Concession 16 Table 3.3: Breakdown of Localities by Type of Energy (2015) 19 Table A.1: KAMA Number of subscribers by type of clients and by project (cumulative average) in 2014 24 Table A.2: KAMA Collection Performance (2014) 25 Table A.3: Average Price, in XOF per kWh (2014) 27 Table A.4: Cumulative Operating Expenses and Revenues by Project in XOF (2014) 29 Table B.1: List of PCASER Projects 31 Figures Figure 2.1: Map of Mali 3 Figure 2.2: Mali Power Market Structure 4 Figure 2.3: Change in Electrification Rate in Mali (1990-2012) 7 Figure 2.4: Population with Access to Electricity, Mali (1990-2012) 7 Figure 2.5: Electricity Map of Mali (Focus on More Populated Southern Half of Country) 9 Figure 2.6: Zones d'Electrification Multi-sectorielle – « ZEMs » 11 Executive Summary Mali has had success developing mini-grids using a concession approach. Spontaneous “bottom-up� concessions, authorized and subsidized by the rural electrification agency AMADER, have built around 250 small power projects connecting 78,000 rural households. Despite some difficulties, these small power projects have been financially sustainable, as evidenced by operators staying in the industry without ongoing subsidies from donors or governments. History: The state-owned vertically-integrated power company, Energie du Mali (EDM), was privatized using a concession contract in 2000. However, the company returned to Government hands in 2005 due to disagreements with proposed rate increases. In 2004, the Government created the rural electrification agency, AMADER (Agence Malienne pour le Développement de l’énergie Domestique et de l’Electrification Rurale), with the main goal of extending access to electricity in rural and peri-urban areas. AMADER, with help from the World Bank, tried to tender out large zonal area concessions of around 10,000 customers. This approach was unsuccessful. AMADER also issued public tenders for concessions. This approach was also unsuccessful. The third approach, Projets de Candidatures Spontanées d'Electrification Rurale (PCASER), attracted significant interest from small, local entrepreneurs, who developed hundreds of projects between 2004 and 2015. Bottom-Up Concessions: Under PCASER, interested parties can approach AMADER with proposals to build out projects with a capacity smaller than 250 kW. There are now more than 250 mini-grids operating in the country operated by around 68 private operators and the state-owned vertically integrated utility Energie du Mali (EDM). The majority of the projects are powered by diesel-fired generators, and some are in the process of converting to larger hybrid solar-diesel generators. The private operators usually manage between 1 and 4 mini-grids each, although the largest, KAMA, manages 15 mini-grids covering 31 municipalities. Several private operators built grid extension projects, but were unsuccessful in negotiating power purchase agreements with EDM. As part of an agreement mediated by the Government, EDM bought these installations at the cost of the investment made by the developers, which is around 25 percent of their book value. Rural Electrification Agency as Promoter and Regulator: The rural electrification agency, AMADER subsidizes the initial investment costs of new connections to users. AMADER is responsible for promoting and regulating mini-grids. It has played an important role in investing in projects in Mali. It has on average subsidized 75 percent of the capital investment cost of new installations, with private operators financing the rest, usually by themselves. Private operators must recover their initial investment and their ongoing operations and maintenance costs through their tariffs. As a result, the price of electricity for households in these mini-grids is currently around US$0.50 kWh. This tariff is around three times higher than the tariff paid by customers attached to the EDM national grid. New Directions: Mali has been in a precarious state since 2012 when a civil war broke out between northern rebels and Government forces in the South. However, AMADER is building on its experience with the PCASER concessions and encouraging private concessionaires to build out larger projects based on solar-diesel hybrid generators. i Key Lessons: The PCASER projects illustrate lessons for governments considering using a concession approach to rural electrification:  A poorly functioning state-owned national utility creates a drag on the whole sector and has negative repercussions on rural areas. EDM absorbs significant amounts of subsidies and sells power below cost. The difference between the EDM tariff and rural tariffs has been the cause of significant problems for private rural concessionaires, and the Government has had to intervene in several cases to mediate disputes.  There is a trade-off between project approval speed and good governance. AMADER is a central agency with a great deal of responsibility over the rural electricity sector. Some people in the sector have bemoaned how much discretion AMADER has, and how difficult it can be to understand how they reach their decisions, or if they are procuring at “least-cost.� However, imposing technocratic requirements of good governance may in fact hamper efforts to build projects quickly, albeit imperfectly. Mali’s approach may have benefited from the fact that AMADER awards authorizations without requiring up-front competition for each authorization.  Giving formal regulatory authority to the rural electrification agency may be the most effective way to implement mini-grid concessions. Mali’s success with bottom up development of private mini-grids seems attributable, at least in part, to the fact that AMADER performs two roles: it gives grants and technical assistance but it also regulates the mini-grids in its authorization and grant agreements (through regulation by contract). In contrast, in other countries (including for example Senegal), these two functions are performed by two different government agencies. This divided regulatory arrangement may make it more difficult to manage mini-grid concessions.  Mini-grids power by diesel-fired generators can be financially sustainable. Despite their high unit costs and other shortcomings, diesel-fired generators have been a key part of Mali’s rural electrification success. However, whether Mali’s mini-grid concessions will be able to recover their long-run costs (including replacement equipment), remains to be seen. ii 1 Introduction In Mali, public-private concessions for rural electrification have been widely used since 2003. The purpose of this report is to review Mali’s experience of rural electrification concessions and evaluate their performance of the concession approach. For the purposes of this report, a rural electrification concession is a public-private partnership in which a private entity is granted a long-term right to provide electricity service in rural areas through a distribution grid. The Mali case study is one of six detailed case studies that form a body of evidence on the experience and successes of rural electrification concessions across sub-Saharan Africa. Mali’s rural electrification approach and background information on the power market are presented in Section 0. The Government of Mali has granted “authorizations� that are similar to concessions to dozens of small private operators to build and operate mini-grids in rural areas. These concessions, started under the “PCASER� program (Projets de Candidatures Spontanées d'Electrification Rurale), are discussed in Section 3. We conclude in Section 4 with an evaluation of the relative success of these concessions at sustainably increasing access to electricity. Appendix B is a detailed study of the experience of one of Mali’s largest rural concessionaires, KAMA. Appendix B is a catalogue of all the mini-grid authorizations and concessions in Mali, and the technology used by their generation plants. 1 2 Mali Background To put Mali’s rural electrification concessions in context, we first present the country’s historical, economic, and political context. Table 2.1 gives references. Table 2.1: Mali Summary Statistics Indicator Value Demographics Population, total (2014) 15,768,227 Population growth, 10-year average (2004-2014) 3.09% Rural population (% of total population) (2014) 60.86% Rural population growth, 10-year average (2004-2014) 1.89% Population density (people per sq. km of land area) (2014) 12.09 Economy GDP per capita (2014, current US$, market exchange rate) 766 Real GDP per capita growth, 10-year average (2004-2014) 1.19% Debt to GDP (2014) 32.10% Electricity Sector Access to electricity, rural (2012, % of rural population) 11.90% Access to electricity, national (2012, % of total population) 25.60% Electric power consumption (kWh per capita) (2012) Not available Governance Ease of Doing Business index (2015 ranking out of 189 countries) 146 CPIA property rights and rule-based governance rating (2014); 2.5 1=low to 6=high Government bond ratings (S&P Long-Term) Not rated Corruption Perceptions Index (2014) - scale of 0 (highly corrupt) to 32 100 (very clean) Legal system Civil law and customary law Administrative tradition French Fragile or conflict-affected state (any year, 1990-2015) Yes Economy and demographics Mali has a population of 15.8 million, of which 9.6 million live in rural areas. 1 Income levels are low at US$766 annual GDP per capita. Over the 10 years between 2004 and 2014, the 1 World Bank Open Data (2014) 2 population has been growing at 3.09 percent per year. GDP per capita (in real PPP terms) has grown at 1.25 percent per year over the same period. 60 percent of the population is rural. The rural population growth rate is just 1.87 percent per year. Population density is low. The population is dispersed and unevenly distributed as about 60 percent of Mali’s surface area is desert.2 Figure 2.1: Map of Mali Source: CIA World Factbook Politics and governance A former colony which gained independence from France in 1960, the country was ruled by a single party until 1991, when multi-party democracy was introduced.3 However, in 2012, a military coup replaced the civilian government and an interim administration was put in place.4 Rebel groups in Northern Mali started a secessionist rebellion that is ongoing as of September 2015. In 2014, Transparency International’s corruption perceptions index ranked Mali at 115 out of 175. The legal system is based on civil law, with the final court of appeal being the Cour Suprême du Mali (Supreme Court). The administrative tradition is French. Mali has been a fragile or conflict-affected state since 2012.5 2 World Bank. Project Appraisal Document: Rural Electrification Hybrid System Project. (2013) 3 United States Department of State. Background Note: Mali. (2015) 4 United States Department of State. Background Note: Mali. (2015) 5 According to the World Bank’s Harmonized List of Fragile Situations for Fiscal Year 2015, available online at: http://www.worldbank.org/content/dam/Worldbank/document/FY15%20Fragile%20states%20list.pdf 3 2.1 Power Market Structure The current structure and legal framework of the electricity sector in Mali results from a major reform undertaken following the "Sector Policy Letter of Electricity and Water Supply" dated 10 November 1999. At the time, the Government of Mali noted that only 8 percent of the Malian population and less than 1 percent of the rural population had access to electricity. The main principles of the reform are provided for by an Ordinance enacted in March 2000 (the “Electricity Ordinance�).6 The Regulatory Commission of Electricity and Water (Commission de Régulation de l’Electricité et de l’Eau - CREE) is the sector regulator, established at the same time.7 The power market in Mali is presented in Figure 2.2. Figure 2.2: Mali Power Market Structure Energie du Mali (EDM) is the state-owned vertically-integrated power company. It owns most of the country’s electricity production, transport and distribution facilities, except for hydroelectric facilities. The Government sold 60 percent of EDM in 2000 to a consortium that included the French company Bouygues and a subsidiary of the Agha Khan Development Fund. A concession agreement was signed between the State and EDM. Following a difference of views between SAUR and the Malian authorities, SAUR sold back its shares to the Government and to AKFED group. It seems that the dispute started with the refusal of the government to apply the second price revision requested by the concessionaire. The parties were not inclined to settle this dispute since the new government of Mali was not in favor of private management of utilities and Bouygues was willing to 6 Ordinance n°00-019/P-RM dated March 15, 2000 on the reorganization of the electricity sector and implementation Decreen°00-184/P-RM dated April 14, 2000. 7 Ordinance n°00-021/P-RM dated March 15, 2000 and implementing Decree n°00-185/P-RM dated April 15, 2000. 4 disengaged from utilities. As a result the Government and the AKFED group respectively hold 66 percent and 34 percent of EDM share capital. Since 2010, EDM received a significant amount of subsidies to cover operating costs, especially fuel purchases. The level of subsidy in 2014 and 2015 was around FCFA30 billion (US$51.5 million). It is expected to be maintained at this level in 2016.8 EDM rights and obligations vis-à-vis the State are still governed by the concession agreement.9 EDM’s concession perimeter includes 98 localities.10 This EDM perimeter may interfere with rural electrification projects as rural electrification projects have been conducted in these same areas. The EDM concession provides for the right of independent mini-grid operators to operate within the EDM concession perimeter, with EDM’s permission, until EDM can expand its activities. The development of rural electrification includes projects in 36 isolated municipalities within EDM concession perimeter, which are in the process to be transferred back to EDM11, identified in Appendix B. The rural electrification agency is called the Malian Agency for the Development of Domestic Energy and Rural Electrification (AMADER - Agence Malienne pour le Développement de l’énergie Domestique et de l’Electrification Rurale). AMADER is a public establishment (Etablissement Public à caractère Administratif) with legal personality and financial autonomy, under the supervision of the Ministry in charge of Energy. AMADER’s main task is extending access to electricity in rural and peri-urban areas. The Rural Electrification Fund (FER - Fonds d’Electrification Rurale) is a fund under the control of AMADER and held with the Ministry of Finance. The Ministry for Energy and Water (MEE) is one of Mali’s largest and most important ministries. The National Directorate of Energy (DNE - Direction Nationale de l’Energie) is a division of the MEE. The head of DNE is appointed by Decree of the Council of Ministers on the proposal of the Minister in charge of energy. This Directorate was reorganized in 2007 in view of the reinforcement of its role in terms of definition of development and control strategies.12 DNE is currently in charge of:  Participating in defining strategies of the Ministry, preparing technical studies, action programs, draft laws and regulations in all branches of the energy sector, including infrastructures, energy management  Coordinating, controlling and monitoring the implementation of energy policies and regulations by public administration and by the operators in the energy sector  Conducting preliminary investigations on the content of decisions to be taken and activities to be undertaken by public authorities as well as the right to approve, suspend or amend decisions already made. Other agencies involved in the electricity sector include: 8 EDM and AMADER interviews 9 EDM and AMADER interviews 10 EDM, « La société », available at https://www.edm-sa.com.ml/index.php/2014-05-27-14-04-15 (accessed December 1st 2015). 11 EDM interview, September 2015. 12 Decree n°07- 254/P-RM dated August 2, 2007 5  The Agency for Renewable Energies (l’Agence des Energies Renouvelables du Mali AER-MALI), established in October 201413, which replaces the Center of Solar Energy and Renewable Energies (Centre National de l’Energie Solaire et des Energies Renouvelables - CNESOLER). Unlike CNESOLER, AER MALI is a public establishment with legal and financial autonomy and may raise funding to carry on its activities  The National Agency for the Development of Biofuels (Agence nationale pour le Development des Biocarburants – ANADEB), established in 2009, which cooperate with AMADER to develop biofuels power plants in rural areas.14 Some concessions have been granted to independent power producers, which have entered into exclusive power purchase agreements with EDM. It appears however that only one of these independent power plants is currently operating:  A five-year concession agreement has been granted in 2007 to the company SOPAM for the financing, construction and operation of a 56MW heavy fuel thermal power plant in Sirakoro; the plant has started operation on mid-2011 and is producing 35MW;  A concession agreement was concluded in 2010 for a period of 10 years with the company Albatros for the construction and operation of a heavy fuel thermal power plant of an installed capacity of 70MW and 51MW guaranteed capacity, located in Kayes; works were suspended in 2012 due to the troubles. An amendment has been signed in 2015 in view of increasing the guaranteed capacity of the plant to 66MW and extending the term of the concession up to 20 years  A concession agreement was concluded in 2009 for a period of 15 years with the US company Vica technologies for the construction and operation of an 30MW biomass power plant in Noumoubougou, with 15MW guaranteed capacity. In 2009 the Government of Mali adopted, a new scheme for the reorganization of the management of public water and electricity services (Schéma Optionnel de Réorganisation de la Gestion des services publics de l’Eau et de l’Electricité - SORGEE), the premises and personnel related to the water utility have been transferred to a new entity with effect from 1 January 2011. According to the unbundling principles set forth by the Electricity Ordinance, production, transport and distribution of electricity may be carried out separately by public or private operators in accordance with a concession or an authorization. 13 By Ordinance n° 2014 – 012 dated October 1st, 2014 14 By Ordinance n°006/P-RM dated March 4, 2009 6 Figure 2.3: Change in Electrification Rate in Mali (1990-2012) 26 Electrification Rate (%) 17 17 12 11.9 3.2 2.2 0.1 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Year Rural National Source: World Bank Open Data Figure 2.4: Population with Access to Electricity, Mali (1990-2012) 18,000,000 16,000,000 14,000,000 12,000,000 Population 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 1990 2000 2010 2012 Rural population without electricity Rural population with access to electricity Total population without electricity Total population with access to electricity Source: World Bank Open Data 7 Concessions and Authorizations The following activities may only be delegated through a concession, awarded following a call for bids, in accordance with the procedure determined by the Regulatory Commission of Electricity and Water (Commission de Régulation de l’Electricité et de l’Eau – CREE):  Hydroelectric production regardless of the capacity;  Thermal energy production exceeding 250 KW;  Building and operation of electricity transport networks;  Distribution requiring medium voltage equipment. A concession for production, transport and distribution may be granted to the same concessionaire. A concessionaire can therefore operate a vertically integrated business. This is currently the case for EDM. An authorization on the other hand is granted by the Minister in charge of Energy to operators called “permissionnaire� with respect to:  Thermal power production with an installed capacity exceeding 50 kW and up to 250 kW; a new authorization must be requested in case of any significant increase of the installed capacity and the permissionnaire must request the granting of a concession in case the installed capacity exceed 250 kW (however AMADER allows a permissionnaire exceeding this threshold to continue to operate under its authorization15)  Distribution of low voltage electricity through a grid extension. The procurement method is a key difference between a “concession� and an “authorization�. Concession contracts are tendered using a competitive process, whereas authorization contracts can be granted following unsolicited bids from candidate operators. In the “authorization� process, if AMADER accepts an unsolicited bid, it files a public notice that it has awarded a preliminary permit. Competing proposals are then allowed within a 60-day period. This process is discussed in more detail in Section 2.2 under the heading “authorization process�. In this case study, we consider “authorizations� to be concession contracts. Authorizations grant an entity the right to build and operate an electricity asset for a relatively long period of time. Figure 2.5 is an electricity map of Mali. It shows the following:  Towns and population centers (in small black dots)  The main EDM grid and EDM grid-connected and off-grid localities (in red lines and red circles)  Private operators of mini-grids powered by thermal energy (yellow circles) and by hybrid systems (blue circles). 15 This policy is adopted pursuant to the reference framework for the development of rural electrification prepared by the government but is in contradiction with the Ordinance and would require the Ordinance to be amended accordingly. 8 Figure 2.5: Electricity Map of Mali (Focus on More Populated Southern Half of Country) Source: Direction Nationale de l’Energie (Mali) 9 2.2 Rural Electrification Approach The Electricity Ordinance (enacted in March 2000) addressed the development of rural electrification in few provisions, whereby:  The Minister in charge of energy is responsible for establishing and updating a electricity sector development program;  The Minister encourages and supports the creation of a network of private enterprises capable to supply the equipment and provide services related to rural electrification;  Authorizations to develop and operate production and distribution premises may be granted to those rural communities that lack access to the public service;  Investment subsidies may be granted by the government through the Rural Electrification Fund (Fonds d’Electrification Rurale – FER) established by the Electricity Ordinance as a special account of the public treasury and not as an entity. In 2000, access to electricity in rural areas was very low. The World Bank estimated that the rural electrification rate was less than 1 percent.16 The state-owned electricity company, EDM, was poorly managed and unable to finance expansion of the network to rural areas.17 The importance of developing rural areas through infrastructure building including “broadening the energy mix, its diversification and its extension to rural areas to the rural sector� was highlighted by the Framework Letter from the President of Mali to the Prime Minister, dated 23 October 2002. In May 2003 AMADER was established18 and a document called “Reference Framework for the Development of Rural Electrification� (Cadre de Référence pour le Développement de l’Electrification Rurale - CdR-ER) was prepared by the Government. The CdR-ER sets the main principles and modalities guiding the implementation of rural electrification programs by AMADER. The CdR-ER provides for the granting of authorizations or concessions to operators through three approaches: 1. In the top-down approach, eight large concession areas were drawn up (Zones d'Electrification Multi-sectorielle – “ZEMs�) and AMADER solicited bids through a competitive process. Private operators submitted proposals to AMADER, and were to be selected on the basis of lowest tariff.19 The rural electrification fund financed feasibility studies in the poorer areas. The ZEMs were originally expected to have a potential client base of at least 5,000 clients each.20 The larger size of the top-down approach was meant to attract international operators. A map of the eight ZEMs is given in Figure 2.6. This map shows that the regions were expected to have 10,000 16 World Bank. Project Appraisal Document: Household Energy and Universal Access (October 6 th 2003). 17 World Bank. Project Appraisal Document: Household Energy and Universal Access (October 6 th 2003). 18 Law n°03 - 0 0 6 dated May 21, 2003 and implementing Decree n° 03 – 226 P-RM dated May 30, 2003. 19 CdR-ER section V and Alassane Agalassou, AMADER (March 17, 2011) ESMAP Knowledge Exchange Forum 20 World Bank, HEURA Mali, Project Appraisal Document, clients each. The top-down ZEMs approach was, however, unsuccessful.21 Two bidders eventually responded to a tender offer but they fail to conclude concession agreements.22 This approach was not pursued because of the government's desire for a more rapid approach in agreement with donors. Figure 2.6: Zones d'Electrification Multi-sectorielle – « ZEMs » Source: AMADER 2. The second approach described by the CdR-ER consists of selecting operators for mini-grids or grid extensions following calling for expressions of interests and selecting candidates on the basis of objective criteria such as the number of clients targeted, the tariff and the amount of investment subsidy requested. This approach has not been used so far since it was not considered by the Government and donors to be fast enough. However, public tenders are now being issued by AMADER as part of their program to deploy hybrid solar/diesel generators to established mini- grid operators. 3. In the bottom-up approach, spontaneous project proposals under the “PCASER� program (Projets de Candidatures Spontanées d'Electrification Rurale) are selected based on private operators’ perceived ability to develop and operate a commercially viable project. In accordance with the CdR–ER, investment subsidies of up to 80% 21 World Bank (March 28, 2013) Implementation Completion and Results Report, Mali Household Energy and Universal Access Project (Report No ICR2627) 22 AMADER, Interview with Castalia, September 2015. of the amount of capital expenditures may be granted through the FER (rural electrification fund). The bottom-up “PCASER� approach remains the primary concession method used by AMADER and is described in Section 3. The PCASER approach attracted significant interest from local private sector operators. As of September 2015, 68 private operators are operating in 215 municipalities and 39 single village projects are operated by communities.23 These figures include grid extensions projects and projects within the initial EDM concession perimeter, as well as projects that have been transferred to or are in the process of being transferred to EDM. Central Role of AMADER AMADER plays a central role as the agency responsible for developing household energy and rural electrification. In this respect, according to the Law establishing the agency, AMADER: (i) promotes electrification in rural and peri-urban areas, (ii) works with all types of operators, national and international private, operators, NGOs, decentralized groups, cooperatives, (iii) provides technical assistance and financial support (investment subsidies), and (iv) is responsible for managing the Rural Electrification Fund. AMADER also analyzes subsidy requests and business plans and prepares all the documents in relation to the granting of authorizations to rural operators by the Minister in charge of Energy. The agency concludes 15-year “authorization contracts� (which are concession-type agreements) as well as financing conventions with the operators. As part of its monitoring rights under the authorization contracts, AMADER authorizes electricity price adjustments for rural operators. The extent of these latest tasks may appear to go beyond the mission defined by the Law, which might be adjusted accordingly. Rights and obligations of Permissionnaires According to Decree n°00-184/P-RM implementing the Electricity Ordinance, the beneficiary of an authorization is a “permissionnaire�. Rights and obligations of the permissionnaire are similar to those of a concessionaire, both benefitting from a delegation of the public service. The permissionnaire must comply with the same general principles deriving from the operation of a public service than a concessionaire, as set forth in particular by the implementing decree of the Electricity Ordinance. The permissionnaire has the right to directly collect the tariff from users. While a call for bids in accordance with the procedure determined by the Regulatory Commission of Electricity and Water (Commission de Régulation de l’Electricité et de l’Eau - CREE), according to the Electricity ordinance and its implementation Decree, authorizations are granted upon the application made to the Minister in charge of energy with no obligation of any competitive process, provided that the applicant is deemed to have the capacity to fulfil its obligations. In case of several applicants the choice is made on the basis of the same criteria. Authorization process The process of granting authorization to an operator may be summarized as follows:  A private entrepreneur or a community within the municipality concerned obtains an opinion from the representative of the municipality on the positive impact of 23 Data supplied by AMADER the Project and its consistency with municipality’s development plan existing or contemplated;  The applicant then files an application for a preliminary permit in attaching the opinion from the municipality and a project description sheet summary describing the scope of the project, its demographic and economic characteristics, the intended electrification system and goals. The application contains an undertaking to file an application for authorization (in accordance with the Electricity Ordinance) including the results of a technical and economic study of the electrification project within a six-month period  After granting the preliminary permit, AMADER must publish its decision. This begins a 60-day period during which any other third party candidate can make a better proposal to AMADER for the same project. To our knowledge, in the case another applicant declares its interest within this 60-day period, there is no formal evaluation procedure based on pre-determined criteria. These competing applications have been relatively rare. There have been no more than 3 cases where another applicant declared is interest in an authorization sought by another operator.24  When the 60-day period has expired, the operator with the preliminary permit is the only candidate allowed to submit the final application for obtaining the authorization.  The authorization is granted on the basis of the AMADER’s analysis of the business plan submitted by the applicant. Where the authorization is granted by the Minister on the basis of AMADER’s analysis, AMADER and the operator enter into the authorization contract and the financing convention. This procedure appears to be a formality rather than a genuine opportunity for the Minister to evaluate projects. World Bank Involvement In 2003, the World Bank’s Household Energy and Universal Access (HEURA) project supported Mali’s implementation of a concession approach to rural electrification. This project included support to develop AMADER, support for “top-down� zonal concessions and the “bottom-up� PCASER program.25 Many benefits were anticipated by the establishment of the rural electrification approach and the HEURA project, including:  Increasing the capacity and the number of staff at AMADER, CREE DNE (Direction Nationale de L'Energie), and DNCN (Direction Nationale de la Conservation de la Nature)  Increasing the private operators offering decentralized electricity services from two to ten 24 AMADER, Interview with Castalia, September 2015. 25 World Bank. Project Appraisal Document: Household Energy and Universal Access (October 6 th 2003).  Increasing access to modern energy outside the EDM concession area to: 40,000 homes, 1,080 enterprises, 125 rural schools and 107 health clinics.26 By 2008, the World Bank HEURA project had performed satisfactorily and succeeded in a number of areas: 41 electrification projects proposed by local private operators had been financed; 20 business plans had been selected and were awaiting financing; 36 business plans were being reviewed to ascertain their technical and financial viability; and 44 business plans were under development by promoters.27 Connections were extended to 690 public and community institutions and centers, including 82 schools and 45 health centers. 28 The targets for the HEURA project, and the expected benefits, grew in 2008 when additional World Bank financing of US$35.0 million of was secured for the HEURA project. More recently the World Bank’s Rural Electrification Hybrid System Project (Systemes Hybrides pour lElectrification Rurale – SHER) is aiming at increasing access to electricity and electricity production from renewable energy sources. The SHER project is structured around three main components: 1) Increasing renewable energy generation capacity in approximately fifty existing rural mini-grid power stations currently relying exclusively on diesel generation by including hybrid systems (including photovoltaic panels, inverters, batteries, and control electronics; this component includes as well extension and densification of distribution network; 2) Expand off-grid lighting and solar lanterns in targeted rural areas through catalyzing the markets, and improve energy efficiency and promote a rational and efficient use of electricity on targeted mini-grids, and 3) Project implementation and capacity building. 26 World Bank. Project Appraisal Document: Household Energy and Universal Access (October 6 th 2003). 27 World Bank. Project Paper on Proposed Additional Financing Credit to the Republic of Mali for a Household Energy and Universal Access Project (July 31, 2008). pg. 11. 28 World Bank. Project Paper on Proposed Additional Financing Credit to the Republic of Mali for a Household Energy and Universal Access Project (July 31, 2008). pg. 11. 3 Mali’s Rural Electrification PCASER Concessions The PCASER projects in Mali today are operated by a combination of community organizations, private enterprises, entrepreneurs, and a few international companies.29 According to data received from AMADER, 68 private operators are operating in 215 municipalities and 39 projects are operated by communities, for a total of 254 projects in operation. Among the private operators only four are operating more than three projects. A list of projects and operators is given in Schedule 1. 17 operators are operating in more than two municipalities and four of them are operating in more than 20 municipalities. The four operators who are present in more than 20 municipalities are presented in Table 3.1. Table 3.1: Private Operators with Operations in more than 20 Municipalities Operator Number of Number of Projects municipalities connected ACCESS 12 22 KAMA 15 31 SSD KURAYE 4 26 SSD YEELEN 5 21 KOURA Source: AMADER AMADER estimates that all the projects listed in Appendix B have connected approximately 78,000 customers to electricity connections.30 This figure includes customers connected to mini-grids managed by EDM, the state-owned utility. All projects operated by private operators or communities cover both production and distribution. Thirteen grid extension projects to be connected to EDM grid have never been operated by their promoters as a result of the lack of agreement between EDM and the operators on electricity sale and purchase conditions. A PPA agreement couldn’t be reached. These grid extensions projects are or will be transferred to EDM, upon the government’s decision. As a compensation for the transfer, EDM pays to the private operator the portion of the net book value of the investment in proportion of the financing brought by the private operator (usually 25 percent). The localities, where these grid extensions were built and the 36 localities which were initially within EDM perimeter and will be transferred back to EDM, in applying the same financial terms as above mentioned, are identified in the list of PCASER projects given in Appendix B. 29 Interview, World Bank (July 2015) 30 AMADER interview: according to estimates made by operators in their feasibility studies, 75328 households should have access to electricity in 2013 and an additional 2,600 in 2014. 3.1 Stages of Development A timeline showing the major stages of development leading up to the concession is presented in Table 3.2. Table 3.2: Stages of Development of Concession 3.2 Operations and Management The permissionnaires have diverse ranges of skills sets and management capacity. Many are small and do not have extensive operational or management know-how. However, some are ambitious and growing their businesses through adding connections or offering alternative services to their customers. The extent to which international partners involved in operations and management is generally limited. Tariffs The tariffs charged by the private rural operators are significantly above those charged by EDM. This difference creates "rate envy," angers rural customers, particularly in areas near the EDM grid. In 2011, the government forced EDM to connect its grid to 7 mini-grids near the EDM concession area.31 This example shows how 1) mini-grids can be an intermediate stage for the electrification of communities; and 2) mini-grid operators need to evaluate how grid electrification might impact their service areas. The tariff differences have created tension in communities about to be served by rural operators. In some cases, there has even been violence when new rural operators try to offer electricity services. In one case, customers became violent and threatened to burn a new generation unit, thinking that, as a result, they would receive later on the less expensive grid electricity. 31 EUEI PDF, “Mini-Grids Policy Toolkit�, 2014, available online at http://euei- pdf.org/sites/default/files/files/field_pblctn_file/RECP_Mini%20Grid%20Policy%20Toolkit-web- %28pdf%2C%2014%20MB%2C%20FR%29_0.pdf (accessed October 8th 2015). 3.3 Financing Arrangements In accordance with the Reference Framework, a subsidy of investment costs is allocated for up to 80 percent of the amount of the investment. At least 20 percent of the initial capital investment is provided by the private operator. The amount of the grant depends on the number of contemplated subscribers, the purchasing power of the population, the rural electrification technology. We understand that the 20 percent of the capital is raised from operators’ own funds or those of local entrepreneurs or partners. There is very little formal bank lending to private operators. In practice, AMADER has been financing on average about 75 percent of the investments in new rural mini-grids, with the operators providing the remaining 25 percent of the financing32. Subsidies are currently funded by multilateral and bi-lateral development aid. AMADER would like to secure the sustainability of rural electrification development through financing investment subsidies by the payment of a portion of the energy income received by EDM. The terms and conditions for the payment of the subsidy are defined in a financing convention signed between the permissionnaire and AMADER acting as manager of the Rural Electrification Fund. In accordance with this convention:  The permissionnaire must provide evidence of the existence of its portion of the financing within 60 days from the signature of the financing convention and use it to invest in the equipment before any disbursement of the subsidy;  When the financing to be provided by the permissionnaire is disbursed and invested a fist payment of 25 percent maximum of the subsidy is paid; other payments are made depending on the progress of the works in accordance with the time schedule agreed between the permissionnaire and AMADER. We learned that some entrepreneurs have been inflating their capital investment estimates in order to receive larger subsidies. 3.4 Contractual Arrangements Private rural operators are granted an authorization relating to power production with an installed capacity exceeding 50 kW and up to 250 kW. There is no competitive process. They receive first a preliminary permit on the basis of an application including a certificate from the representative of the municipality on the positive impact of the Project, upon submission of an application to AMADER and undertakes to apply for authorization within a six month period. The authorization is granted by the Minister on the basis of the AMADER’s analysis of the business plan submitted by the applicant. Contracts in practice When the authorization from the Minister is granted, the applicant and AMADER sign an “authorization contract� which defines the rights and obligations of the permissionnaire in a way similar to a concession agreement, including technical specifications attached. 32 World Bank, “Mali: Rural Electrification Hybrid System Project,� November 15th 2013, Project Appraisal Document, Report No: PAD688. It may be noted that AMADER, represented by its chairman, is signing these contracts on its own name and not on behalf of the Minister in charge of Energy, who delivers the authorization. It seems that the conclusion of this contract by AMADER on behalf of the Minister would better correspond to the allocation of powers and provide more legal safety. The authorization contract is concluded for 15 years. Under the authorization contract the permissionnaire undertakes to:  Build out the proposed investment, maintain and renew the equipment;  Realize inside electrical installation of the subscribers;  Provide the service during at least seven consecutive hours per day;  Pay to AMADER a “regulation fee� of 2 percent of turnover. In the case that an entity obtains a concession contract for an area that includes an area where an entity operates under an authorization contract, the permissionaire agrees to negotiate in good faith the terms of surrender of his authorization to the concessionaire. The payment of financial compensation should cover at least the net book value of the investment financed by the permissionnaire. This commitment is part of the application file and of the authorization contract. Growing from a permissionnaire to a concessionaire When the installed capacity of a mini-grid grows from below 250 kW to above 250 kW, a conflict appears between the law and the practice. Under the Electricity Ordinance33, a new authorization must be requested in the case of any significant increase of the installed capacity. However, in practice, AMADER allows a permissionnaire exceeding this threshold to continue to operate under its authorization, in order to avoid the competitive procedure required for a concession agreement. The AMADER policy of allowing authorizations to exceed the 250 kW threshold is adopted pursuant to the Reference Framework (CdR-ER) for the development of rural electrification prepared by the Government of Mali.34 The CdR-ER policy document (2003) states that “in the event the capacity of the power plates for a given territory exceeds 250 kW, this territory can have several authorizations for each village or group of villages�.35 The practice could be brought into compliance with the law by amending the Ordinance accordingly.36 3.5 Technological Approach The majority of the Mali’s permissionaires use vertically-integrated mini-grids backed by diesel-fired generators. Increasingly, hybrid solar/diesel systems are being deployed. 33 Ordinance n°00-019/P-RM dated March 15, 2000 on the reorganization of the electricity sector and implementation Decreen°00-184/P-RM dated April 14, 2000. 34 Ministry of Mines, Energy and Water (Mali), “Cadre de Référence pour le Développement de l’Electrification Rurale - CdR-ER�, May 2003. 35 Ministry of Mines, Energy and Water (Mali), “Cadre de Référence pour le Développement de l’Electrification Rurale - CdR-ER�, May 2003, pg. 5. 36 This policy is adopted pursuant to the reference framework for the development of rural electrification prepared by the government but is in contradiction with the Ordinance and would require the Ordinance to be amended accordingly.. Twenty permissionaires built out grid-extension projects, but none were able to agree on power-purchase agreements with EDM. EDM sees the private operators as competitors. As a result of a settlement negotiated by the President, EDM was allowed to buy the grid extension projects from the private operators at around 25 percent of their book value—the investment cost that was incurred by the private operators. The Government of Mali may have favored this option under pressure from prospective new clients preferring to become EDM customers (and pay the EDM tariff) rather than becoming customers of small operators (and paying a relatively higher tariff). Other than the grid extension projects, the permissionaires don’t interact with the existing transmission and generation sectors. The number of electrified localities broken down by technologies serving them is presented in Table 3.3. Table 3.3: Breakdown of Localities by Type of Energy (2015) Type of Energy Number of localities Diesel-fired generators 133 Hybrid Solar/Diesel: 28 Biofuel 15 Grid extension 20 Multi-functional Platforms (MFP) 42 Individual Solar Kits 15 Micro-hydro energy 1 Total 254 Source: AMADER 3.6 Regulatory Arrangements The PCASER projects are regulated by AMADER. The Electricity Ordinance provides for the principles of tariff regulation. Sales by concessionaires are subject to regulation by the directives from the national regulator (Regulatory Commission of Electricity and Water – CREE). On the other hand, sales by permissonnaires are free. In practice, the prices set by permissionnaires are regulated by AMADER on the basis of the authorization contract entered into between the permissionnaire and AMADER. In effect, this is “regulation by contract�. The law and the contracts allow for the initial tariff to be changed in accordance with a tariff indexation formula depending on the variation of the fuel prices, the wage index for the Public Service in Mali, the price index for capital goods in OECD countries. AMADER still needs to agree to any requested tariff change. Authorization holders initiate the tariff adjustment by applying to AMADER. However, whether this tariff indexation process has been implemented as intended is not clear. One concessionaire, KAMA (examined in detail in Appendix A) applied for a revision of the tariff but never received it. 4 Assessment of Concession We evaluate Mali’s PCASER concession approach to rural electrification against its targets, analyze the reasons for the results, and present lessons for future concessions. 4.1 Evaluating Success of Concession The PCASER concessions succeeded at extending 78,000 connections to rural households. However, the results of the concession depend on the dimension of success: 4.1.1 Access At the outset of the concession approach, the Government of Mali had no explicit targets in terms of number of connections. However, in 2003 the World Bank had a target of 40,000 connections within 5 years from effective date. In 2009, the Government of Mali set an electrification coverage target of 50 percent by 2015. The people we met with in Bamako said the target was politically oriented and that few people at the time believed this target to be achievable. 78,000 rural households have been connected to electricity as a result of the bottom-up PCASER concession approach.37 To our knowledge, Mali is the best developed case of mini- grids increasing access at this scale. AMADER shared with us how they arrived at this estimate. They added the number of connections established during 2013 and 2014 to a World Bank estimate of 74,787 connections published in March 2013. The 74,787 figure appears in the Implementation Completion and Results Report (ICR) for the HEURA project as an estimate for the number of connections on June 30th 2012.38 We estimate that the number of people with electricity connections in their households is 577,200. We arrive at this number by assuming that a household in Mali has 7.4 people, 39 and multiplying that figure by the 78,000 rural households that have access to electricity. The PCASER approach has quite clearly been a success at extending access to rural households. However, this success may not be as high as one might be led to believe by other estimates. A number of sources estimate the rural electrification rate in Mali to be between 11 percent and 18 percent.40 These estimates would suggest that between 1.05 million and 1.73 million rural people have access to electricity in Mali.41 37 AMADER, Interview with Castalia, September 2015. 38 World Bank, “Mali: Household Energy and Universal Access Project,� March 28th 2013, Implementation Completion and Results Report (ICR), Report No: ICR2627. 39 We base this assumption on four recent surveys in Mali that reported household sizes from 5.7 to 9.1. From “Do Household Definitions Matter in Survey Design? Results from a Randomized Survey Experiment in Mali� by Lori Beaman, Northwestern University, June 2011. 40 These sources include the World Bank Open Data bank, the World Bank PADs and ICRs for the most recent Mali projects, and people Castalia met in Bamako. 41 Based on a Malian rural population estimate of 9.60 million from World Bank Open Data (2014). Because the rural electrification rate was nominal in 2003, we find it difficult to explain the discrepancy between these estimates. The discrepancies could be due to: 1. Differences in the definition of “rural� vs. “urban�. In many countries, government officials had different approaches to defining what areas were considered rural. 2. Differences in the definition of “access�. We believe that these estimates could derive from a broad interpretation of “access to electricity�. The 2013 Rural Electrification Hybrid System Project Appraisal Document suggests this could be the case as it estimates that “1,200,000 people gained access to modern energy services through the project (based on a fairly extensive definition of access including some populations benefiting from public lighting).�42 3. Other energy access projects undertaken outside of PCASER. It is possible that other actors, such as EDM or off-grid energy services companies could have added connections during this time. 4.1.2 Quality of service AMADER specifies technical standards and a minimum number of hours per day that electricity must be supplied. However it is not clear how Mali’s rural private operators are faring against these standards and minimum requirements. 4.1.3 Sustainability In our assessment, many of the operating concessions are sustainable. They receive no ongoing donor funding and are able to recover their costs through tariffs. We reviewed the financials for one of the bigger private rural operators, KAMA. They show that five of its 15 concessions are profitable. 4.1.4 Efficiency We are not able to assess whether the deployment of diesel-fired mini-grids in Mali was the ‘least-cost’ approach. The deployment of mini-grids in Mali has mostly been the result of private operator’s decisions about what was viable rather than optimizing techno-economic outcomes. The majority of the private operators elected to invest in diesel-fired generation sets. In theory, an 80 percent capital expenditure subsidy favors technologies such as solar and hydro that have a higher ratio of upfront capital costs to operations and fuel costs. However, these technologies have been used in few projects. 4.1.5 Other Impacts The concessions had a number of reported social and economic impacts in Mali’s rural areas. For example, over time the need for installing and maintaining generators has led to the creation of skilled jobs in rural areas. AMADER estimates that around 800 skilled jobs have been created by rural private operators. There are now training programs specialized in rural electrification. 42 World Bank, “Mali: Rural Electrification Hybrid System Project,� November 15th 2013, Project Appraisal Document, Report No: PAD688, pg. 17. 4.2 Arrangements that Could Have Delivered Better Results Ex-post, it is difficult to say whether alternative arrangements could have delivered better results. We identified several short-comings in the approach. Specifically, AMADER may not be getting the best deal because its procurement process is not very competitive and its project evaluation process is fairly opaque. There are institutional remedies for these problems, such as:  Increasing competition by using calls for election of interests for the PCASER projects, instead of spontaneous or unsolicited proposals  Improving the assessment of business plans by setting clear, objective, quantifiable evaluation criteria and using independent experts to assess proposals;  Strengthening transparency of the process by having the assessment of the business plans and recommendation for granting the authorization conducted by an independent committee. This committee could, for example, be composed of professionals from government or civil society, and chaired by AMADER. However, we also believe that these institutional changes may have hindered the entire PCASER process because of the difficulties associated with running competitive tenders. AMADER’s recent steps to promote hybrid systems43 seek to rectify some of the perceived shortcomings of PCASER while building on its successes. The new approach seeks to:  Encourage projects of a larger scale;  Reduce the unit investment costs;  Improve the operating performance and capacity of the operators  Move towards sector consolidation.44 4.3 Reasons for Results The results of the concession are explained by the following key factors:  Leveraging local capacity. In the early 2000s, the hope was to attract international operators to large concession areas. It’s likely that these larger concessions, had they occurred, would have had difficulties dealing with the realities of operating in Mali.  A combined promoter and regulator for rural electricity can be very effective. AMADER is powerful and well-resourced relative to rural electrification agencies in other countries. As a result, it has been able to institute its vision in rural areas.  National utilities are threatened by competition. EDM is a state-owned company but its efforts have undercut rural electrification efforts by AMADER and by private operators. 43 Supported by the World Bank Rural Electrification Hybrid System Project. 44 World Bank, “Mali: Rural Electrification Hybrid System Project,� November 15th 2013, Project Appraisal Document, Report No: PAD688. 4.4 Replicability of Experience and Success The concession model used in Mali and its success can be replicated elsewhere. Bottom-up concessions like those envisaged in PCASER can be quite rapidly deployed and tap local entrepreneurs quickly. Top-down concessions are slower to implement, require a more capable rural electrification agency and more institutional support. However, electrification progress has slowed since the Northern Mali conflict, and it remains to be seen if mini-grids can form the foundation for a larger electrification roll-out. 4.5 Lessons for Future Concessions The PCASER projects illustrate lessons for governments considering using a concession approach to rural electrification:  A poorly functioning state-owned national utility creates a drag on the whole sector and has negative repercussions on rural areas. EDM absorbs significant amounts of subsidies and sells power below cost. The difference between the EDM tariff and rural tariffs has been the cause of significant problems for private rural concessionaires, and the Government has had to intervene in several cases to mediate disputes.  There is a trade-off between project approval speed and good governance. AMADER is a central agency with a great deal of responsibility over the rural electricity sector. Some people in the sector have bemoaned how much discretion AMADER has, and how difficult it can be to understand how they reach their decisions, or if they are procuring at “least-cost.� However, imposing technocratic requirements of good governance may in fact hamper efforts to build projects quickly, albeit imperfectly. Mali’s approach may have benefited from the fact that AMADER awards authorizations without requiring up-front competition for each authorization.  Giving formal regulatory authority to the rural electrification agency may be the most effective way to implement mini-grid concessions. Mali’s success with bottom up development of private mini-grids seems attributable, at least in part, to the fact that AMADER performs two roles: it gives grants and technical assistance but it also regulates the mini-grids in its authorization and grant agreements (through regulation by contract). In contrast, in other countries (including for example Senegal), these two functions are performed by two different government agencies. This divided regulatory arrangement may make it more difficult to manage mini-grid concessions.  Mini-grids power by diesel-fired generators can be financially sustainable. Despite their high unit costs and other shortcomings, diesel-fired generators have been a key part of Mali’s rural electrification success. However, whether Mali’s mini-grid concessions will be able to recover their long-run costs (including replacement equipment), remains to be seen. Appendix A: Small Concessionaire Summary – KAMA Background and motivation KAMA carries on various activities in the energy sector including supply and installation of generators, lines and substations. Founded in Mali, KAMA has established subsidiaries in Guinea and Ivory Coast. In 2006, Mr Mamadou SAKO, KAMA’s CEO, decided to submit a project for producing and distributing electricity in four villages (with four 80kW generators) within the town of Diakon, his native town, in the Kayes Region. Extent of rural electrification operation KAMA now operates 16 projects and serves more than 5000 clients in 31 villages located in five different regions (mainly in the Kayes Region). See Table A.1. Table A.1: KAMA Number of subscribers by type of clients and by project (cumulative average) in 2014 Public Residential Health Public Cult Project Businesses Schools Lightening TOTAL Customers Centers Institutions Places Places Sadiola 1 008 6 3 6 2 6 54 1 085 Keniéba 814 72 2 28 3 7 87 1013 Siribala 713 64 1 5 1 5 53 842 Diafarabé 343 28 1 2 1 3 72 450 Fourou 501 23 1 3 1 1 70 600 Trentoumou 71 3 1 0 1 1 12 89 Kembélé 31 10 1 0 1 1 12 56 Bendougou 131 21 0 1 0 1 14 168 Sibendi 103 0 1 0 0 1 12 117 Diakon 99 0 1 2 1 1 12 116 Sangafé 17 3 1 0 1 1 14 37 Diabadji 58 0 0 0 0 2 40 100 Diataya 123 0 0 0 1 0 40 164 Loulouni 195 4 1 0 0 4 60 264 Sandaré 174 29 1 3 1 3 39 250 Kembé 58 5 0 0 0 1 9 73 TOTAL 4 439 268 15 50 14 38 600 5 424 Source: KAMA None of the projects are connected to EDM network. A project generally includes several generators located in several villages. Service hours are always beyond the compulsory seven hours per day, as provided for in the AMADER specifications. It may be up to 15 hours per day in the largest villages. All the generators are diesel generators, except for two of them where hybrid photovoltaic/diesel power plants have been installed. According to KAMA, hybrid generators do not result in reducing the cost of kW/h due to the higher investment cost. However, hybrid solutions allow (i) more rapid expansion of access without waiting for a minimum number of clients, (ii) a more regular service in remedying the lack of diesel supply and (iii) to stabilize the costs. Tariffs Most of the clients are billed on a monthly lump sum basis. Monthly subscriptions vary depending on the category of service chosen. Table A.3 shows the average kW/h charge per project in 2014. KAMA never obtained a revision of the tariff provided for in the Authorization Agreement, in applying the conditions of revision provided for by the general specifications attached to the Agreement. The average rate of collection efficiency established from KAMA data is always above 70 percent, except in two localities where it is below 60 percent. See Table A.2. Table A.2: KAMA Collection Performance (2014) Average recovery rate Location (%) Sadiola 91 Keniéba 71 Siribala 72 Diafarabé 85 Fourou 75 Sandaré 80 Trentoumou 73 Kembélé 82 Bendougou 58 Sibendi 81 Diakon 77 Kembé 83 Sangafé 79 Diabadji 59 Diataya 80 Loulouni 78 TOTAL 77 KAMA complains about collection difficulties and is contemplating to invest in systems allowing prepayments. However, such systems are too expensive compared to the number of clients in a number of cases. Financials45 KAMA has in most cases financed its capital expenditures in using the average rate of subsidy. However in some instances KAMA share of investment financing has been larger. The following examples of financing the reinforcement of capacities and extension of grids have been given: SADIOLA: reinforcement of production capacity and extension of grids Cost: XOF 754,387,322 KAMA share: XOF 529,387,322 XOF, i.e.: 70.17% AMADER financing: XOF 225,000,000, i.e.: 29.83% It seems that such examples of apportionment of the financing are seldom. SANDARE : reinforcement of production capacity and extension of grids Cost: XOF 201,797,100 KAMA share: XOF 46,413,333, i.e.: 23% AMADER financing: XOF 155,383,767 i.e.: 77% Fuel generally represents more than 80% of operating expenses (excluding depreciations and provisions). Table 4 attached shows operating expenses, revenues, profit or loss per project. Only five projects (those with the largest number of clients) show a profit. Main challenges and problems The discrepancy between EDM tariff and tariff applied by rural electrification projects is too big and is difficult to understand by consumers. Kamma had to face violent reactions from consumers at the occasion of tariff collection. The lack of profitability of its power generation and distribution activity reduces KAMA’s capacities to invest in order to reinforce its production capacity or convert power plants into hybrid systems. KAMA recognizes AMADER’s role in the quality control, in particular by having the services rendered controlled by independent surveyors. However, AMADER’s efficiency has been questioned on two specific topics.  In one occasion, KAMA received an Authorization to invest in a new project and started to disburse its share, while the subsidy could not be supplied since the corresponding financing was not anymore available due to the elapse of time. According to KAMA, AMADER did not inform them of the risk of unavailability of funds and this caused damages to KAMA.  Another important concern is related to the non-reimbursement of VAT applicable to purchase of diesel for the generators. Procedures requested from AMADER and custom authorities are so strict and burdensome that KAMA never received any reimbursement of VAT, while it should benefit from it. In 2014, this represents approximatively FCFA 81 millions of VAT paid on 820,000 45 Throughout this study we use the following exchange rate: 1 West African CFA Franc equals 0.001545 US Dollars. liters of diesel consumed. KAMA believe that an exemption mechanism should be put in place rather than a reimbursement and pointed out that EDM is benefitting from such direct exemption. Table A.3: Average Price, in XOF per kWh (2014) Month FOROU SADIOLA KENIEBA SIRIBALA DIAFARABE January 973 295 278 315 0 February 715 280 430 300 420 March 705 247 255 316 458 April 1 476 273 245 323 1 069 May 410 253 230 335 533 June 0 262 240 321 550 July 0 264 317 415 530 August 0 285 250 375 440 September 0 292 260 401 560 October 0 268 275 233 506 November 0 255 202 208 493 December 0 279 270 227 534 Month SANDARE TRENTOMOU KEMBELE BENDOUGOU SIBENDI January 484 1 787 1 364 377 491 February 482 2 122 1 281 437 603 March 383 1 594 1 102 383 532 April 0 1 687 779 499 588 May 461 1 318 898 577 468 June 368 1 315 1 262 486 535 July 444 1 579 1 244 523 698 August 255 1 587 1 071 345 397 September 424 1 044 1 195 345 477 October 546 1 906 1 475 474 539 November 373 1 686 2 284 364 441 December 357 816 1 086 366 508 Month DIAKON KEMBE DIATAYA January 490 706 728 February 486 837 928 March 342 805 568 April 464 799 614 May 398 1 269 794 June 382 1 016 710 July 476 991 652 August 364 986 583 September 471 1 003 458 October 385 806 552 November 0 642 486 December 484 574 0 Source: KAMA Table A.4: Cumulative Operating Expenses and Revenues by Project in XOF (2014) Operating expenses (excluding depreciation and Sadiola Kéniéba Siribala Diafarabé provisions) Fuel (Generator) 142 165 000 210 938 000 41 336 400 20 369 000 Lubricants (Generator) 2 037 595 1 504 350 885 000 483 800 Consumables 6 000 1 000 0 0 Office supplies 208 100 134 150 102 050 18 400 Fuel and lubricant (Vehicle) 421 715 645 550 169 250 119 900 Travels 0 20 000 7 500 5 000 Rent and rental expenses 455 000 690 500 18 500 137 500 Generators maintenance (external services) 5 097 960 4 405 692 2 750 800 562 300 Miscellaneous maintenance 265 900 663 532 58 975 280 675 Miscellaneous management costs 840 000 814 300 0 0 Personnel costs 7 418 109 7 141 568 4 773 732 3 240 000 Miscellaneous expenses 270 200 88 606 0 169 500 TOTAL Operating expenses 159 185 579 227 047 248 50 102 207 25 386 075 Operating revenues Sale of energy 256 260 440 375 024 256 64 783 946 26 402 444 Subscription fees 1 346 280 1 058 620 90 000 278 600 TOTAL Operating revenues 257 606 720 376 082 876 64 873 946 26 681 044 Gross operating profit/loss 98 421 141 149 035 628 14 771 739 1 294 969 Operating expenses (excluding depreciation and Fourou Sandaré Trentoumou Kembélé provisions) Fuel (Generator) 26 591 800 16 885 000 3 489 100 2 706 800 Lubricants (Generator) 225 000 626 147 70 000 65 000 Consumables 400 000 0 328 000 132 500 Office supplies 16 500 28 000 62 200 23 400 Fuel and lubricant (Vehicle) 39 735 247 050 178 750 105 850 Travels 0 119 500 34 000 5 000 Rent and rental expenses 160 000 70 000 0 100 000 Generators maintenance (external services) 0 349 000 140 000 45 000 Miscellaneous maintenance 46 000 250 700 166 850 90 800 Miscellaneous management costs 111 600 204 300 25 700 0 Personnel costs 2 520 000 1 786 004 300 000 300 000 Miscellaneous expenses 15 500 326 400 455 750 82 000 TOTAL Operating expenses 30 126 135 20 892 101 5 250 350 3 656 350 Operating revenues Sale of energy 24 387 464 16 772 359 5 685 080 2 237 360 Subscription fees 614 335 358 000 122 550 41 000 TOTAL Operating revenues 25 001 799 17 130 359 5 807 630 2 278 360 Gross operating profit/loss -5 124 336 -3 761 742 557 280 -1 377 990 Operating expenses (excluding depreciation and Bendougou Sibendi Diakon Kembé provisions) Fuel (Generator) 14 320 200 7 462 550 9 515 200 5 405 225 Oil purchase (Generator) 177 000 68 000 75 000 300 500 Consumables 8 000 0 0 0 Office supplies 5 000 14 750 5 000 9 000 Fuel and lubricant (Vehicle) 179 412 165 300 98 800 103 450 Travels 15 000 10 000 0 5 000 Generators maintenance (external services) 1 235 750 210 250 187 300 492 000 Miscellaneous maintenance 54 300 68 850 76 100 7 500 Miscellaneous managment costs 0 0 52 000 0 Personnel costs 480 000 420 000 420 000 420 000 Miscellaneous expenses 1 620 340 37 300 758 240 17 000 TOTAL Operating expenses 18 095 002 8 457 000 11 187 640 6 759 675 Operating revenues Sale of energy 14 611 470 7 248 838 8 001 550 3 463 003 Subscription fees 148 540 127 700 52 540 TOTAL Operating revenues 14 760 010 7 376 538 8 001 550 3 515 543 Gross operating profit/loss -3 334 992 -1 080 462 -3 186 090 -3 244 132 Operating expenses (excluding depreciation and Sangafé Diabadji Diataya Loulouni provisions) Fuel (Generator) 2 233 758 1 076 000 5 243 000 13 649 750 Lubricants (Generator) 71 000 13 500 372 900 298 000 Consumables 0 0 0 143 000 Office supplies 4 000 0 11 400 8 575 Fuel and lubricant (Vehicle) 45 950 12 000 54 100 104 250 Travels 8 000 0 0 27 525 Rent and rental expenses 0 0 0 180 000 Generators maintenance (external services) 102 500 38 000 202 500 55 000 Miscellaneous maintenance 9 000 0 35 000 43 550 Miscellaneous management costs 0 0 7 200 13 600 Personnel costs 300 000 300 000 1 014 000 1 320 000 Miscellaneous expenses 14 500 30 000 210 900 76 600 TOTAL Operating expenses 2 788 708 1 469 500 7 151 000 15 919 850 Operating revenues Sale of energy 1 445 540 974500 6 343 070 15 411 029 Subscription fees 67400 25 000 396 400 TOTAL Operating revenues 1 445 540 1 041 900 6 368 070 15 807 429 Gross operating profit/loss -1 343 168 -427 600 -782 930 -112 421 Appendix B: List of PCASER Projects Table B.1: List of PCASER Projects Region Locality Operator Type of Projects to energy be transferred to EDM 1 Kayes 90 Localities 1. Ambidédikoré SSD KURAYE KURUMBA Diesel 2. Awoiny GTE Diesel 3. Badinko SOGEP Diesel 4. Batama GIE KALAOU-MOULINE Diesel 5. Bendougou KAMA Diesel 6. Bongourou Comité Local-Bongourou MFP 7. Diakon KAMA Diesel 8. Dialaka SSD KURAYE KURUMBA Diesel 9. Dialaya Comité Local-Dialaya MFP 10. Diandioumbéra Comité Local-Diandioumbéra MFP 11. Diankounté KAGNELA Diesel 12. Diataya KAMA Diesel 13. Diboli SEF Diesel 14. Diéma EGB Diesel x 15. Digokory MECOF Diesel 16. Dioncoulané SSD KURAYE KURUMBA Diesel 17. Diongaga SSD KURAYE KURUMBA Diesel 18. Djabadji KAMA Diesel 19. Djédigui Kassé KAMA Hybrid Diesel/Solar 20. Djidjan SOGEP Diesel x 21. Djoumara BECI Diesel 22. Dogofiry SSD KURAYE KURUMBA Diesel 23. Doualé KAMA Hybrid Diesel/Solar 24. Dramanekoré SSD KURAYE KURUMBA Diesel 25. Gagny SSD KURAYE KURUMBA Diesel 26. Gakoura SSD KURAYE KURUMBA Diesel Region Locality Operator Type of Projects to energy be transferred to EDM 27. Gory SSD KURAYE KURUMBA Diesel 28. Gouméra BLUE SKY Diesel 29. Gourel GTE Diesel 30. Guindinta KAMA Hybrid Diesel/Solar 31. Kabou MECOF Diesel 32. Kakoulou GIE DJEYASO Diesel 33. Kalaou GIE KALAOU-MOULINE Diesel 34. Kandia KAMA Hybrid Diesel/Solar 35. Kassaro ESE2 Biofuel Diesel 36. Kembé KAMA Diesel 37. Kembélé KAMA Diesel 38. Kéniéba KAMA Hybrid x Diesel/Solar 39. Kersignané SSD KURAYE KURUMBA Diesel 40. Kersignané Kaniaga SSD KURAYE KURUMBA Diesel 41. Kirané SSD KURAYE KURUMBA Diesel 42. Kodié SSD KURAYE KURUMBA Diesel 43. Kokofata SABOU Diesel 44. Koméolou SSD KURAYE KURUMBA Diesel 45. Koniakary SSD KURAYE KURUMBA Diesel x 46. Korokodjo BMB Hybrid Diesel/Solar 47. Kourounidifing KAMA Hybrid Diesel/Solar 48. Kourounikoto SOGEP Diesel 49. Koury KAMA Diesel 50. Krémis SSD KURAYE KURUMBA Diesel 51. Lakanguémou SSD KURAYE KURUMBA Diesel 52. Lambidou ABIS DISTRIBUTION Diesel 53. Lany MECOF Diesel 54. Logo sabouciré GIE DJEYASO Diesel 55. Loumbama KAMA Diesel Region Locality Operator Type of Projects to energy be transferred to EDM 56. Loumbougana GTE Diesel 57. Madina KAMA Hybrid Diesel/Solar 58. Madina GTE Diesel 59. Maréna Diombougou SSD KURAYE KURUMBA Diesel 60. Mélo BLUE SKY Diesel 61. Mouliné GIE KALAOU-MOULINE Diesel 62. Nomo BMB Hybrid Diesel/Solar 63. Oussoubidiagna MOHA COM Diesel 64. Sadiola KAMA Hybrid x Diesel/Solar 65. Sagabary EGEC Diesel 66. Sambaga SSD KURAYE KURUMBA Diesel 67. Sambakanou SSD KURAYE KURUMBA Diesel 68. Sandaré KAMA Diesel 69. Sangafé KAMA Diesel 70. Sébékoro ESE2 Diesel 71. Ségala SSD KURAYE KURUMBA Diesel x 72. Sélinkégni MOHA COM Diesel 73. Séro BLUE SKY Diesel 74. Sibendi KAMA Diesel 75. Sirakoro EJD Diesel 76. Sobokou MECOF Diesel 77. Somankidy SSD KURAYE KURUMBA Diesel 78. Soroané MOHA COM Hybrid Diesel/Solar 79. Tabakoto ETL Diesel 80. Tambacara SSD KURAYE KURUMBA Diesel 81. Tambaga ESE2 Biofuel Diesel 82. Tigana MOHA COM Hybrid Diesel/Solar 83. Toukoto REXMETAL Diesel 84. Trentoumou KAMA Diesel Region Locality Operator Type of Projects to energy be transferred to EDM 85. Tringa Maréna SSD KURAYE KURUMBA Diesel 86. Troun Comité Local-Troun MFP 87. Troungoumbé BMB Diesel 88. Yaguiné SSD KURAYE KURUMBA Diesel 89. Yélimané SSD KURAYE KURUMBA Diesel x 90. Yéréré BMB Hybrid Diesel/Solar 2 Koulikoro 43 localities 1. Baguineda SGEI EDM Grid Transferred 2. Daral DENTAL EDM Grid Transferred 3. Djalakorodji GIE YELENBA EDM Grid Transferred 4. Fanafiècoro DENTAL EDM Grid Transferred 5. Fanafiècoura DENTAL EDM Grid Transferred 6. Kambila DENTAL EDM Grid Transferred 7. Kanadjiguila EOK EDM Grid Transferred 8. Mamaribougou EOK EDM Grid Transferred 9. Ouézindougou EOK EDM Grid Transferred 10. Samaya EOK EDM Grid Transferred 11. Sanankoroba ERD EDM Grid Transferred 12. Tienfala CATERES EDM Grid Transferred 13. Banankoro ERD EDM Grid 14. Bancoumana ACCESS Hybrid Diesel/Solar 15. Dialakoroba MES Biofuel Diesel 16. Diawanèbougou DENTAL EDM Grid 17. Didiéni BECI Diesel 18. Digan SAFEELEC Diesel 19. Dioliba EMS Biofuel Diesel 20. Farabougou Comité Local-Farabougou MFP 21. Kafara SAFEELEC Diesel 22. Kéla Comité Local-Kéla MFP 23. Kerouané HORONYA Diesel Region Locality Operator Type of Projects to energy be transferred to EDM 24. Kolokani SBNIF Diesel x 25. Koloni ACCESS Biofuel Diesel 26. Korokoro Comité Local-Korokoro Diesel 27. Kourémalé SPE Hybrid Diesel/Solar 28. Madiga Sacko KAMA Diesel 29. Madina Sacko AFRIMPEXE Diesel 30. Markacoungo KNEM Diesel 31. Nara EES Hybrid Diesel/Wind 32. Naréna Comité Local-Naréna MFP 33. Nionsombougou MES Diesel 34. N'Tobougou Comité Local-N'Tobougou MFP 35. Sanankoro Djitoumou SAFEELEC Diesel 36. Siby CHARBEL Diesel 37. Simidji Comité Local-Simidji MFP 38. Soninkégni DENTAL EDM Grid 39. Sougoula SAFEELEC Diesel 40. Tiendo Comité Local-Tiendo MFP 41. Tigui Comité Local-Tigui MFP 42. Tinkélé SAFEELEC Diesel 43. Touba HORONYA Diesel x 3 Sikasso 62 localities 1. Banankoro KAMA Diesel 2. Baramba SSD YEELEN KOURA Individual Solar 3. Blindio SSD YEELEN KOURA Individual Solar 4. Bougoula ACCESS Biofuel Diesel 5. Dembéla Comité Local-Dembéla MFP 6. Denié ACCESS MFP 7. Dessina ACCESS MFP 8. Fanidiama COGEACOM Diesel Region Locality Operator Type of Projects to energy be transferred to EDM 9. Faragouara ACCESS MFP 10. Finkolo SSD YEELEN KOURA Individual Solar 11. Finkolo Ganadougou ACCESS Diesel 12. Foh Comité Local-Foh Biofuel Diesel 13. Foulalaba ACCESS MFP 14. Fourou KAMA Diesel 15. Garalo ACCESS Biofuel Diesel 16. Goualala ACCESS MFP 17. Kalana ERD EDM Grid 18. Karangana SSD YEELEN KOURA Individual Solar 19. Kébila ACCESS Biofuel Diesel 20. Kéléya MES Biofuel Diesel 21. Kerekoumana ACCESS MFP 22. Kifosso SSD YEELEN KOURA Individual Solar 23. Kignan SSD YEELEN KOURA Hybrid x Diesel/Solar 24. Kléla SSD YEELEN KOURA Individual Solar 25. Kologo ACCESS Diesel 26. Kolondiéba SSD YEELEN KOURA Hybrid x Diesel/Solar 27. Konséguéla SSD YEELEN KOURA Individual Solar 28. Koualé Comité Local-Koualé Biofuel Diesel 29. Koumantou SSD YEELEN KOURA Hybrid x Diesel/Solar 30. Koury SSD YEELEN KOURA Hybrid x Diesel/Solar 31. Lobougoula EAT Diesel 32. Localités Solaires SAFEELEC Individual Solar 33. Loulouni KAMA Diesel 34. Madina Kouroulamini ACCESS MFP 35. Mafelè ACCESS Diesel Region Locality Operator Type of Projects to energy be transferred to EDM 36. Manankoro ACCESS Biofuel Diesel 37. Masssigui ACCESS Diesel 38. Missirikoro Comité Local-Missirikoro Biofuel Diesel 39. Molobala SSD YEELEN KOURA Individual Solar 40. M’Pessoba SSD YEELEN KOURA Hybrid x Diesel/Solar 41. Nampasso Comité Local-Nampasso Biofuel Diesel 42. N’Goko COGEACOM Diesel 43. Niaradougou Comité Local-Niaradougou MFP 44. Niena SSD YEELEN KOURA Hybrid x Diesel/Solar 45. Ouassada Comité Local-Ouassada MFP 46. Ouré Comité Local-Ouré MFP 47. Ouré ACCESS Hybrid Diesel/Solar 48. Ourikila SSD YEELEN KOURA Hybrid Diesel/Solar 49. Samogossoni Comité Local-Samogossoni MFP 50. Sansana SSD YEELEN KOURA Individual Solar 51. Sanso SSD YEELEN KOURA Individual Solar 52. Sekorolé ACCESS MFP 53. Sido Comité Local-Sido Biofuel Diesel 54. Sincina SSD YEELEN KOURA Individual Solar 55. Sirakorobougou KAMA Hydroelectric 56. Sotien Comité Local-Sotien MFP 57. Yangasso DJENNE PROXIMITE Diesel 58. Yiridougou ACCESS MFP 59. Yorobougoula ELECTRIMAX Diesel 60. Yorontiéla ACCESS MFP 61. Yorosso SSD YEELEN KOURA Hybrid x Diesel/Solar 62. Zantiébougou ACCESS Hybrid Diesel/Solar Region Locality Operator Type of Projects to energy be transferred to EDM 4 Ségou 18 localities 1. Barouéli CTEXCEI-GNETA Diesel x 2. Bla SSD YEELEN KOURA Diesel x 3. Boidié GIE FITINE Diesel 4. Cinzana SDD Diesel 5. Dioro EPRODED Diesel x 6. Dougoukouna SDD Diesel 7. Farakala Comité Local-Farakala MFP 8. Kamba GIE FITINE Diesel 9. Kimparana SSD YEELEN KOURA Hybrid x Diesel/Solar 10. Kokry GIE BEESAGO Diesel 11. Kondogola Comité Local-Kondogola MFP 12. Konobougou GTE EDM Grid Transferred 13. Sékoro SDD Individual Solar 14. Siribala KAMA Diesel 15. Sokolo EENTGEC Diesel x 16. Tènè FASO TRAVAUX Diesel 17. Ténéni SEECO Hybrid Diesel/Solar 18. Touna EJD Diesel 5 Mopti 18 localities 1. Bankass SEB Diesel x 2. Baye Comité Local-Baye MFP 3. Boni EGI Diesel 4. Dia SEER Diesel x 5. Diafarabé KAMA Diesel x 6. Dinangourou KAMA Diesel x 7. Diondjory GIE BELDEHORE Diesel 8. Douary KAMA Diesel 9. Gangafani KAMA Diesel 10. Hamdallaye Comité Local-Hamdallaye MFP Region Locality Operator Type of Projects to energy be transferred to EDM 11. Irébane Comité Local-Irébane MFP 12. Konna GES Diesel x 13. Korientzé HAOUKOUNA Diesel 14. Koro SEK Diesel x 15. Nouh Peul Comité Local-Nouh Peul MFP 16. Sofara SPGE Diesel x 17. Téninkou MOYERE SB Diesel x 18. Yerendourou KAMA Diesel 6 14 localities Tombouctou 1. Almoustrat Comité Local-Almoustrat MFP 2. Atta Comité Local-Atta Individual Solar 3. Bintagoungou Mairie Bintagoungou Diesel 4. Douékiré EMC Diesel 5. Essouk Comité Local-Essouk MFP 6. Gossi GOURMA CONSTRUCTION Diesel 7. Guindigata Comité Local-Guindigata MFP 8. Léré ENORD Diesel 9. M'Bouna ALBARKA YERKOYE Diesel 10. Meykoré EMC Diesel 11. Tin Tellout Comité Local-Tin Tellout MFP 12. Tonka Mairie Tonka Diesel x 13. Toukabangou Comité Local-Toukabangou MFP 14. Yourmi Comité Local-Yourmi MFP 7 Gao 9 localities 1. Ansongo TILGAZ Hybrid x Diesel/Solar 2. Bagoundjé SGE EDM Grid 3. Bavaria SGE EDM Grid 4. Bentia Comité Local-Bentia MFP 5. Bourem TILGAZ Diesel x 6. Gounzoureye SGE EDM Grid Region Locality Operator Type of Projects to energy be transferred to EDM 7. Labézanga Comité Local-Labézanga MFP 8. Menaka TILGAZ Diesel x 9. Ouatagouna Comité Local-Ouatagouna MFP Source: AMADER and EDM interview (on projects to be transferred back)