Document of Z - - 2 "- 24- The World Bank f E FOR OFFICIAL USE ONLY ReportNo. 3227-MLI STAFF APPRAISAL REPORT REPUBLIC OF MALI POWER/WATER PROJECT June 10, 1982 Regional Prjocts Department Western Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document of Z - - 2 "-24-
The World Bank f E
FOR OFFICIAL USE ONLY
ReportNo. 3227-MLI
STAFF APPRAISAL REPORT
REPUBLIC OF MALI
POWER/WATER PROJECT
June 10, 1982
Regional Prjocts DepartmentWestern Africa Regional Office
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
Currency Unit = Malian Franc (MF) 1/US$1.00 = MF 500MF 1 = US$0.0020
MF 1000 = US$2.0
ABBREVIATIONS AND ACRONYMS
ADB - African Development BankCCCE - Caisse Centrale de Cooperation EconomiqueCEAO - Communaute Economique de 1-Afrique de l'OuestDHE - Direction de l'Hydraulique et de l'EnergieECICA - Ecole Centrale pour l'Industrie, le Commerce
et l'AdministrationEDF - Electricite de France
EDM - Energie du Mali
ENA - Ecole Nationale d-AdministrationENI - Ecole Nationale d-IngenieursFAC - Fonds d'Aide et de CooperationFED - Fonds Europeen de DeveloppementKfW - Kreditanstalt fuer WiederaufbauOMVS - Organisation de Mise en Valeur du fleuve SenegalOPEC - Organization of the Petroleum Exporting Countries
MEASURES AND EQUIVALENTS
One Kilovolt (kV) = 1,000 VoltsOne Megawatt (MW) = 1,000 Kilowatts (kW)One Gigawatt Hour (GWh) = 1 million Kilowatts hours (kWh)One Ton Oil Equivalent (TOE) = Approximately 7.33 barrels of crude oilOne Kilo calorie (kcal) = 3.97 British thermal units (BTU)
EDM-s fiscal year is the calendar year.
1/ The Malian Franc is tied to the French Franc in the ratio of one FrenchFranc to 100 Malian Francs. The French Franc is currently floating.
REPUBLIC OF MALI FOR OFFICIAL USE ONLY
STAFF APPRAISAL REPORT FOR POWER/WATER PROJECT
OUTLINE OF REPORT
Page No.
I. INTRODUCTION . * .......................... ... 1
II. THE ENERGY AND WATER SUPPLY SECTORS ....................... 2
Country Energy Outlook ........ . . . . . . . . * ................. . ........ ... . 2Water Supply and Sanitation ............. .......... 3Sectors' Organization .................................... 3The Electric Power Market ....... . .* .............................. . 4Existing Electric Power Facilities ............ ....... 5Existing Water Supply Facilities ................. ft... f...............f.......f 6Tariffs ft ff t ff f ff ft fff..........................................t........ 7Sectors' Planning .f.. ft...ffffffffftttttt.......................... t ttt............. 7
III. THE IMPLEMENTING AGENCY ........................ o..ft......... , 9
Background ft................................................ 9Concession System ftftftftftftftftff............ f .......... a .. ... t .......... 9Management, Organization and Operations ............ ft.....................f 10Staffing and Manpower Requirements ....................... 11Training .ft f fft f f fft................................................ 11Technical Assistance fftfffttffftffftffffttt.......................... f.......... 13Metering, Billing and Collection ......................... 15Accounting and Information System ........... ............. 16
Budgeting .................................. ft ....... 17Audits ................. 17Insurance ............................................. 17
IV. THE PROJECT_ROJECT...fft ft ....... 18
The Program and the Project ............................... 18Program Objectives ........................... I . . .19Project Composition ............................ ft ....... 19
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
Table of Contents cont.
V. ECONOMIC JUSTIFICATION .................................... 30
Power Components ......................................... 30Rehabilitation and Extension of Bamako
System ............................................ 30Mopti/Sevare Biomass Power Scheme .... ............... 31
Water Supply Component ................................... 32Technical Assistance ..................................... 32
VI. FINANCIAL ANALYSIS ....................................... 33
Introduction ......... .................................... 33Background: Status of Assets in the Concession System..... 33Past Earnings ............................................ 35Present Financial Position ............................... 36Tariffs ............ ...................................... 38Revenue Covenant ......................................... 39Financial Projections .................................... 40Future Finances .......................................... 41
VII. SUMMARY OF PROPOSED AGREEMENTS AND COVENANTS .43
Assurances and Covenants .43Recommendations .45
LIST OF ANNEXES
Annex No.
1.1 Documents and Data Available in the Project File .46
2.1 Bamako Electric System - Actual and Projected Generation,Peak Demand, System Capability and Energy Sales 47
2.2 Electric Systems in Provincial Centers (Excepting Segou-Markala and Mopti-Sevare) - Actual and ProjectedGeneration and Energy Sales .48
3.1 Organization Chart of EDM. 49
3.2 Summary of the Rehabilitation Plan for EDM . .50
4.1 Breakdown of Technical Assistance Costs . .51
4.2 Project Monitoring and Reporting Requirements . .52
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List of Annexes (continued)
5.1 Extension of Bamako Distribution - Tabulation for Rate ofReturn Calculation ..................................... 53
5.2 Mopti/Sevare Biomass Power Plant - Tabulation for Rate ofReturn Calculation ..................................... 54
5.3 Water Supply Component - Tabulation for Rate ofE ReturnCalculation ............................................ 55
6.1 Income Statements Power ................................... 566.2 Income Statements Water ................................... 576.3 Consolidated Income Statements ............................ 586.4 Balance Sheets ............................................ 596.5 Sources and Applications of Funds ......................... 606.6 Assumptions for Financial Projections ..................... 61
Map of Mali--Power Sector (IBRD 15332)
Map of Mali--Water Supply Sector (IBRD 15472)
I
REPUBLIC OF MALI
Energie du Mali
First Power/Water Project
I. Introduction
1.01 The Government of Mali has requested the International DevelopmentAssociation (IDA) to participate with Caisse Centrale de Cooperation Economique(CCCE), the Fonds d'Aide et de Cooperation (FAC) and the OPEC Special Fund inthe financing of the first phase (the project) of a two-phase program designedto rehabilitate and extend the services of Energie du Mali (EDM), the para-statal water supply and power utility. The project, which is centered arounda core of technical assistance to redress EDM's current managerial and opera-tionLal problems, would permit better use of Mali's renewable energy resourcesby extending the service area and coverage of the Selingue hydroelectric powerscheme, commissioned in August 1981, and by the use of agricultural residuesfor power production in a biomass plant to be built at Mopti/Sevare. Besidesprovriding for urgent improvements in Bamako's water supply system, the projectwil:L also cover project preparation works for the second phase of EDM's reha-bil:Ltation program. Total cost of the project is estimated at US$43.20 mil-lion, including contingencies, with a foreign component of US$41.25 million.
1.02 The Government has asked IDA to assist in financing the foreignexchange cost of: (i) the technical assistance component; (ii) the rehabili-tation of the Dar Salam diesel electric power plant in Bamako; (iii) a commu-nication system by power line carrier between the Bamako end of the transmis-sioni line from Selingue and the Dar Salam and Sotuba power plants in Bamako;(iv) the strengthening of the Bamako distribution system and a first phase ofextensions; (v) urgent works in Bamako's water supply system; (vi) servicevehicles, tools, and office furnitures; and (vii) pre-construction designstudies for extension of the Sotuba hydroplant, the Bamako-Segou transmissionlink, and the extension of the Bamako water supply system. An IDA credit ofUS$24.00 million is proposed for this project. The beneficiary and implement-ing agency would be EDM. Proceeds of the credit would be onlent by Governmentto EDM at 9.6% interest rate, over a period of 20 years, with a 5-year graceperiod. However, the 9.6% rate shall be reviewed annually by the Governmentand IDA, as the financial conditon of EDM permits, with a view to its progres-sive modification to conform to the then generally applicable relending ratefor proceeds of IDA's credits (para. 6.19). CCCE/FAC would finance 50%(US$10.8 million) of the total combined foreign exchange cost of the technicalassistance component and rehabilitation of the Dar Salam power plant; and theOPEC Special Fund loan -- US$6.45 million--would finance the proposed biomasspower plant at Mopti/Sevare (Table 4.2).
1.03 The Malian request for IDA to participate in financing a powerinvestment program dates back to mid-1977. A Basic Health Needs mission inJur,e 1978 identified justification for IDA assistance in the water/sanitationsector. A full project identification mission visited Bamako in January/February 1979 and discussed possible components of a water/power project and
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the means of preparing it. The identification mission agreed with theGovernment on the scope of the studies needed to prepare a project. Thetotal cost of these studies was estimated at US$0.97 million, almost all inforeign exchange. The Government subsequently requested an advance for thisamount from IDA's Project Preparation Facility, which was granted in October,1979. The project was appraised in June 1980 and post-appraised in April 1981because of change in management. This report is based on the findings of theappraisal and subsequent post appraisal missions and detailed studies of EDM'stechnical assistance needs which were done by a team of specialists fromElectricite de France (EDF). Documents and data available in the Project Fileare listed in Annex 1.1.
II. The Energy and Water Supply Sectors
Country Energy Outlook
2.01 Mali's hydroelectric potential is estimated at 10,000 GWh per annum,of which less than 0.3% has been developed so far. Although Mali is notendowed with abundant forests, firewood constitutes the main source of non-commercial energy. Limited use is now being made of agricultural residues asan energy source in sugar production (bagasse) and cotton ginning. A projectto produce ethanol from surplus molasses at two refineries seems feasible,and the Bank Group has agreed to assist financially in project preparation.Ethanol from this project could replace about 5% of Mali's current gasolineconsumption. Solar energy is being used experimentally in a number of smallwater pumping installations. Exploration and drilling for oil has taken placein Mali's four main sedimentary basins, but these efforts are insufficient toreach definite conclusions. A PPF-financed study concluded that a detailedfield survey and drilling would be needed to evaluate the oil-bearing possibili-ties of the Taoudeni Basin, which is the most promising of these sedimentarybasins. The Bank Group is currently financing a petroleum exploration projectfor this purpose.
2.02 In the meantime, Mali has to rely on its precarious supply offirewood (2.2 million tons per year), some hydroelectricity (30 GWh per year),and import of petroleum products (159,000 tons in 1979). Mali's total currentenergy consumption is 690,000 TOE per year, which, for a population of sixmillion, represents only 115 kg per capita, among the lowest energy usage inthe world.
2.03 Electric service is supplied to 28,000 consumers in Bamako andin ten lesser urban areas. Assuming an average of ten persons per consumerconnection, electric service is supplied to 280,000 people, which is about 30%of the urban population of Mali and less than 5% of its total population.Electric service in rural areas is minimal. The proposed project includesfinancing of a study to survey the needs and possibilities of rural electri-fication (para. 3.21 (v)).
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Water Supply and Sanitation
2.04 According to a recent basic needs study, about 20% of the urbanpopulation in Mali is adequately served by water supply; 12 towns havedistribution systems executed or extended over the past ten years. Thesesystems, however, serve only a small percentage of the population. Bamako,the capital city, has the largest level of service with 40% of the populationserved about equally between standpipes and connections. It is estimated thatonly 25% of the rural population is served by boreholes and water wells, butmany rural water supply programs providing a water point are under way orabout to start with multi- or bilateral aid. The Association is currentlyassisting Mali in preparing a rural water supply project parallel to a healthproject in the western part of the country. There are no sewerage disposalsystems in any town, and Bamako's limited drainage system is clogged due tolack of maintenance.
Sectors' Organization
2.05 Governmental institutions involved in the two sectors are: Directionde! l'Hydraulique et de l'Energie (DHE) under the Ministry of Industrial Devel-opment, the Selingue Authority under the same ministry, and EDM under theMinistry of State Enterprises. DHE is theoretically responsible for planningand implementation of water supply projects and large power schemes, but infact does little planning and only implements water supply projects. Thecoordination between DHE and EDM on new system and reinforcement planning hasbeen very weak, to the extent that EDM is informed of the new assets it musttake over only when works are completed. The Selingue Authority is currentlyoperating the Selingue 44 MW hydropower project commissioned in August 1981.The Authority's revenues will derive essentially from sales of energy to EDM,and will be used to pay operating expenses of the entity and to service thede!bt incurred by loans used to finance the construction of the dam, powerplant, and transmission to Bamako. EDM, which was created in 1961, isconceded water and electric power installations for their management andoperation (para. 3.02). EDM-s shareholders are the Government with 55%participation, and French public interests (EDF and CCCE) with 45%.
2.06 In the last five years EDM has been in disarray through a combina-tion of circumstances, but mainly because of lack of leadership, neglect,arnd financial problems originating from the large increase in petroleumfuel prices after 1973/74 and difficulty in collecting revenues, particu-larly from governmental departments and agencies. These problems areanalyzed in Chapter III, together with other aspects of EDM's organizationand overall management.
2.07 IDA considers that as a long term strategy it would be desirablethat: (i) power and water activities be split and managed separately; and,(ii) that the power sector (EDM and the Selingue Authority) be united under asingle entity with investment planning and financing responsibilities. How-ever, in the short and medium terms only the rehabilitation and strengthen-ing of EDM can be considered a realistic target as described in paras. 4.01
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and 4.02. The long term objectives will be addressed in the secona powerproject, which is expected to help finance Phase II of the program. Toprepare this long term approach, the proposed project includes the financin6of studies to: look into the advantages and disadvantages of a single powerentity versus the current organization of combinea power and water entity(para. 3.21 (vii)); and (b) assess the advantages and disadvantages of con-tinuing with the concession system for EDM (para. 3.03).
The Electric Power Market
2.08 No interconnection exists between Mali's electric systems, andpublic supply of electricity is heavily concentrated in the hydro-thermalsystem supplying Bamako and the surrounding towns of Kati and Koulikouro asshown in the following table: 1/
Table 2.1: EDM -- ELECTRICITY CONSUMPTION AND GENERATION IN 1979
Consumption GWh Y. of TotalBamako/surroundings 72.4 86%Segou/Markala 3.3 4%Mopti/Sevare 1.4 2%Other urban areas 6.7 8%
Subtotal 83.8 100% 63%
Losses, unaccounted forand own use 17.5 17Z
TOTAL 101.3 UO1%
Generation
Hydro 34.6 34%Thermal (diesel) 66.7 66%
TOTAL 101.3 100%
Source: EDM--Statistiques Analytiques.
2.09 Consumption of electricity from the public supply is roughlydivided equally between medium-voltage and low-voltage consumers. Mediumvoltage consumers are essentially industrial customers and governmental
1/ See Annexes 2.1 and 2.2 for actual (1976/79) and projected (1980/88)generation and energy sales.
agencies, while low voltage consumers are mainly residential and commercialusers. For 1979, consumption was divided approximately as follows: resi-dential and commercial, 42X; industrial, 36%; governmental departments andagencies, 15%; EDM's own water supply systems, 6%; and public lighting, 1%.Losses and unaccounted for in Table 2.1 appear to be understated by not lessthan 10%. This is due mainly to overestimation of unmetered consumption.
2.1.0 Peak demand in the Bamako electric system, the only sizeable systemin Mali, grew from 7 MW in 1971 to 15.4 MW in 1978. Electricity consumptionincreased steadily during the same period at an average 12% per year, althoughinsufficient capacity has plagued the system except in 1971, 1974 and 1978when new diesel units were commissioned. The 1981 unsuppressed peak demandwas estimated at 20 MW but the available generating capacity without Selinquewas well below this figure because of breakdowns and poor maintenance. Thenuraber of consumers increased about 7% per year from 10,800 in 1971 to 18,500in 1978, following approximately Bamako's growth in population.
Ex_Lsting Electric Power Facilities
2.11 In 1979 the total installed generating capacity in Mali was 35 MWwith an annual generation of 135 GWh. EDM's share is 25 MW and 101 GWh.Captive plants make up the balance. With the exception of the 5 MW Sotubahy,lroelectric plant on the Niger river near Bamako and the small--500 kW--hydroplant at Kayes, all generation was diesel electric.
2.12 Bamako is supplied by the Sotuba hydroplarnt and the 15.5 MW Dar-Salam diesel electric plant through a primary distribution system at 30 and15 kV which services only a fraction of the city. Low voltage distributionis done at 220/380 V, 50 Hz. A 30 kV line connects Koulikouro with the Bamakoelectric system. The Dar Salam power plant is in precarious condition andis in need of total rehabilitation to serve as stancdby now that Selingue isfully commissioned. The Bamako distribution system, likewise, requiresstrengthening and rehabilitation of certain facilities. Both problems will beaddressed by the proposed project. Public electric service in other regionalcenters originates in small diesel electric plants.
2.13 A 48 MW hydroelectric power plant has been built at Selingue on theSankarani river, a tributary of the Niger, to meet the power requirements ofBamako and southern Mali. Selingue's average annua'L generation is estimatedat 218 GWh delivered at the Balingue substation in ]3amako. Power generationfrom Selingue started in August 1981, and the station is now working at about25% of its energy potential due to lack of demand. Hydroelectric energy fromSelingue, by substituting for diesel-electric generation, will reduce Mali'sgas oil imports, with consequent foreign exchange savings. EDM is purchasingelectric power from the Selingue Authority at the Balingue terminal of a 140km, 150 kV transmission line from Selingue. Selingue has been conceived as amultipurpose project with power, navigation, fisheries, and agriculturalbenefits, but if the total cost of the dam is allocated to its power function,the economic cost per kWh sold would be FM 48 at a discount rate of 10%, whichis the opportunity cost of capital in Mali. This cost compares favorably with
EDM's current running cost (excluding financial charges) of FM99 per kWh fordiesel generation. Up to now EDM has been paying FM 34 per kWh for the energydelivered by the Selingue Authority. However, the Government has latelydecided that with effect from July 1, 1982 EDM will pay MF 40 per kWh forSelingue power and thereafter automatically adjust tariffs to cover anyincreases in the cost of purchased power beyond the MF 40 price.
Existing Water Supply Facilities
2.14 Of the 21 towns which have adequate facilities, 10 are managed byEDM, and the remainder are, up to now, managed by Local Governments. Mostof these schemes have been financed by the Government almost entirely fromexternal grants. Most production facilities are based on treatment ofsurface water from the Senegal and Niger rivers and require large supplies ofchemicals and appropriate maintenance, which have not been available lately.Distribution networks cover only parts of the urban areas and extensionsare usually provided on a piecemeal basis. EDM has some 14,000 registeredprivate connections of which 9,500 are in Bamako; the number of unregisteredconnections appears sizable. While 90% of connections have a meter, no work-shop and spares are available to repair broken meters. As a result, metersare not read in the field, and billing is determined on outdated records.Many standpipes are either inoperative, or turned off because of the largepayments due to EDM by the municipalities. The poor physical condition ofmany facilities and lack of attention to providing appropriate spare parts isdue to the low level of qualification and insufficient training of staff, thelack of a maintenance budget and insufficient qualified staff at headquarterslevel to cope with problems arising from water supply operations.
2.15 The Bamako s stem consists of two treatment units, each with adaily capacity of 750mU, which were constructed in 1974 and 1976 under agrant from Fonds Europeen de Developpement (FED); these units are now utilizedat full capacity during normal periods and cannot meet the entire waterdemand. An older plant built in the 50s composed of two 375 m3 units wasshut down in 1975. The latter could be utilized again at least partly withdirect filtration during the dry season when the water has little turbidityand the water demand reaches its peak. An additional daily capacity of 750 m3
intended to supply Bamako and Kati, (14 km from the capital city) is beingconstructed under a credit from Kreditanstalt fuer Wiederaufbau (KfW) andwould be completed by 1982. The water supply system also suffers frominsufficient and unreliable pumping units at the raw and treated water stages,and would need urgent reinforcement, if not dealt with under the KfW credit,to ensure appropriate distribution of the produced water. The distributionsystem is not sufficiently extended to serve all the town areas, in particularthe newly developed and populated areas south of the Niger river. Significantextensions to the first network date back to the early 60's when Bamako hadonly 1/3 of its current population. Several bottlenecks like uncompletedlooping in the transmission mains, and too small booster stations, preventproper distribution to too elevated or remote city areas.
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Tariffs
2.16 The average price of electricity in Mali during 1979 was FM 55/kWh(US311). On March 1, 1980 the tariffs were increased by 30% across theboard; the new tariffs' average price of FM 69 (USJ13.8/kWh) is below theaverage for landlocked Sahelian countries (US4l6/kWh in Upper Volta, andUSJ23/kWh. in Chad). 1/ The water tariffs were also increased by 30% onMarch 1, 1980. With this increase, the average price for water is now MF 79per m3 (USd15.8/m3). Sales taxes of MF 2 per kWh and MF 20 per m3 are addedto the respective tariffs. Both electricity and water tariffs were increasedby 11% effective February 1, 1982. Adequacy of both power and water tariffsis analyzed in Chapter VI (paras. 6.11 through 6.13)1.
Sectors' Planning
2.17 Planning in the power sector, which was st:imulated during the late60's and early 70's, deteriorated during the last few years. Some planningaction has resumed in this sector prompted by the Bank Group's assistance withthe PPF advance (para. 1.03). Likewise, in the water supply sector, whereplanning has been haphazard, a development program i-or Bamako (Plan Directeur)has been prepared with the help of consultants financed by the PPF advance.
Power Sector Planning
2.18 Broadly speaking, the long term electricity needs of southern andwestern Mali could be met by the proposed 200 MW Manantali hydroplant (800 GWhper year) on the Bafing river, a tributary of the Senegal river. Manantaliwould be built by OMVS 2/ for flood control and irrigation in the lowerreaches of the Senegal river. Power production is a secondary benefitincidental to its main purposes. Power from Manantali could not be availablebefore 1989/90 and increasing amounts of thermal generation will be needed tomeet the peak demand in the dry season from 1987 onwards, (See Annex 2.1), itis planned to extend by 7 MW the Sotuba hydroelectric plant to better use theNiger river flow regulated upstream by the Selingue dam. In the eventManantali is not built, a power project can be developed on the Niger rapidsat Kenie, about 35 km downstream of Bamako. Preliminary assessments indicatethat two power plants could be installed at Kenie with total annual generationof about 800 GWh. This power generation program will be complemented bybuilding a transmission link between Bamako and Segou, which can be extendedin the longer term to form a loop tying the main urban centers of southernMali. These actions on medium/long term power system development planningwill be reviewed, coordinated and finalized by a study to be financed in theproposed project (para. 3.21 (v)).
2.19 Development programs for distribution systems (Master Plans) havebeen completed recently for Bamako and four other urban centers. Thesestudies were financed with the PPF advance.
1/ However, Mali is the only landlocked Sahelian country which benefitsfrom a relatively substantial amount of hydrogeneration.
2/ "Organisation pour la Mise en Valeur du Fleuve Senegal", an interna-tional entity created by Mali, Senegal, and Mauritania.
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2.20 There are a number of urban centers in Mali to which it is notfeasible to extend a central electric system because of long distances andlight loads. For these centers, located particularly in central and northernMali, power production will continue to be thermal. The possibility of usingagricultural residues is being explored by EDM, and a PPF-financed studyhas demonstrated the feasibility of biomass plants if these residues can begathered economically.
Water Supply Sector Planning
2.21 Investments in the water supply sector over the past five yearsamount to about US$12 million and are expected to bring service to an addi-tional 100,000 people. They include: (i) installation of a public watersystem in Kita, and the extension of the Bamako treatment plant, both financedby KfW; (ii) extension of the Gao water supply system financed by FAC; (iii)minor reinforcements of four secondary centers' systems with a CEAO grant;(iv) extension of public water systems in small urban centers with Canadianassistance; and (v) reinforcement of distribution networks in Bamako and Gaounder the IDA financed urban project (Credit 943). Studies for strengtheningexisting water supplies in the capital city and four other centers are alsounderway. A Water Master Plan for Bamako carried out by French consultants(SAFEGE) under the PPF aims at the supply of all the city population withwater by 1986 either by private connection for about 30%, or by standpipes forthe remainder. Although these criteria look acceptable, the objectives areslightly ambitious because the investments required to catch up with thebacklog are estimated to amount to US$55 million in 1980 costs. Other alter-native investment plans have been drawn up on the basis of slower executiontargets and of shifting the full coverage objective to 1990; this would resultin an initial investment of about US$19 million. The same consultants havealso been commissioned to study the strengthening of four large centers underADB financing. The Directorate of Hydraulics and Energy (DHE) has alsosubcontracted studies, funded under a PPF advance, to review the use ofalternative sanitation technologies in Bamako. Reinforcement of water supplyalone without commensurate improvement of the precarious sewage disposalconditions would likely result in further deterioration of health and livingstandards. It is imperative that appropriate, affordable individual andsemi-collective sewage disposal systems be identified now and implementedjointly with the large water supply investments scheduled for the second phaseof the proposed program (para. 4.02).
2.22 In mid 1980 DHE submitted to the Ministry of Plan proposals forwater supply and sanitation over the next four year plan period (1981-1985).These proposals call for extension of water schemes in about 12 towns, six ofthem to be reinforced and the remainder to be provided with simple supplysystems. Resulting cost estimates amount to FM 8.6 billion (US$17 million);they exclude strengthening of schemes mentioned in para. 2.21 still understudy, which would increase these estimates by about 250%. Even with theassistance of multi- and bilateral aid agencies which have already expressedinterest, it is unlikely that these targets can be met since all investmentshave been obtained and will likely continue to come from external financing,with minimal contribution from State or cash generation funds.
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III. THE IMPLEMENTING AGENCY
Background
3.01 EDM was established in 1961 as a "mixed economy" company, i.e.,a joint Government/private owned company, with the Malian Government presentlyholding the majority of the share capital of 55%, and two French publicagencies, CCCE and EDF respectively holding 39% and 6% of the shares. TheCompany is administered by a Board of eight members consisting of the Ministerof "Tutelle" as chairman, three other Malians including the Director of the"Direction de l'Hydraulique et de l'Energie" of the Ministry of IndustrialDevelopment, one staff representative, and three French shareholder nominees.For the last few years, the Board has met irregularly and thus has played onlva liLmited role in the management of EDM.
Concession System
3.02 EDM operates under the "Concession System" still often used inFrench-speaking countries which gives the company the right, for a fixedtenn, to operate, manage and develop the power/water undertaking. Thisincludes the right for the company to levy agreed tariffs and to recover itsinvestment by the end of the concession period. The company does not ownall of the assets it operates. Several major categories of assets, usuallyhydro-power installations, main water works, and most of the distributionnetworks are regarded as public property ("public domain"), and must bereturned in good working order by the company to the Government when theconcession agreement expires, even if part or all of their cost has beenfinanced by the Company. A specific system of depreciation and renewalsappropriations is designed to allow the company to satisfy its variousfinancial obligations (para. 6.02). The advantage claimed for the conces-sion system is that it permits private capital venture into the field ofpublic monopoly whilst ensuring a measure of state control and final owner-ship. However, since the majority of the assets are directly owned by theGovernment, the development of the sector can easily be planned beyond thecontrol of the utility as it is currently happening in Mali. In additionthe complexity of the concession system makes its understanding and correctapplication difficult, and results in confusion for management.
3.03 EDM-s concession agreement was signed in 1961 for a 30 year period,which gives EDM the "concession for production and distribution of power andwater over the territory of the Republic of Mali". A Government decreespecifying EDM-s organization and operations ("Cahier des Charges") wasissued in 1962 which satisfactorily defines EDM-s legal position toward itscustomers and public authorities. These arrangements provide for the parti-cipation of CCCE and EDF in EDM's management, while the Malian Governmentretains control over policy issues through the majority it holds of theBoard. In light of the difficulties pointed out in para. 3.02, the proposedproject includes financing of a study to assess the advantages and disadvan-tages of continuing with the concession system for EDM.
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Management, Organization and Operations
3.04 EDM's General Manager is appointed by Presidential decree. A newGeneral Manager was appointed recently. He is a young and promising official,but inexperienced in the field of public utilities. Considering the varietyand magnitude of the problems that EDM encounters in almost all aspects of itsorganization and operations, the new General Manager will need to be supportedfor some years by an experienced expatriate project manager (para. 3.20).
3.05 EDM's current organization chart gives a pivotal role to the Gen-eral Manager, under whose direct authority are placed a cluster of functionaland operational units. EDM has no overall technical direction, which meansseveral services report directly to the General Manager including: the dis-tribution service for both power and water, two recently organized productionservices (diesel generation and water production outside of Bamako, powergeneration and distribution in Bamako), a planning service, and a purchasingservice. Commercial activities are also not grouped, and responsibilities forcustomer activities are spread under different department heads. No clear-cutmanagement or organizational distinction is made between water and poweractivities. This dispersion of responsibilities places a heavy burden on theGeneral Manager, and does not foster coordination between services, delegationof authority, or adequate evaluation of sector-specific problems. Because ofhis very recent appointment, the new General Manager has not yet implementedany reorganization of the company. However during the post appraisal missionthe general framework of EDM's future organization was agreed (Annex 3.1). Inaddition to the already agreed creation of a water supply service department,the new organization chart translates the consolidation of all generation andtransmission activities in and outside Bamako in a single department, and thereorganization of the Planning and Engineering Departments which will reportto the Deputy General Manager.
3.06 EDM's general organizational pattern can also be found at theoperational units' level, where the chief of each unit retains all authority.Indeed, for most of the outstations, communication problems and low level ofstaff expertise do not allow for any other scheme to be developed. However,the organization of the Bamako unit, which accounts for more than 80% ofEDM's total operational activities, will be considered as a specific problemand will be addressed by the technical assistance team in parallel with thegeneral reorganization of the utility. In addition, the proposed projectincludes financing new buildings to better house the Bamako unit and easecurrent communications and other day-to-day problems.
3.07 These organizational deficiencies have been discussed with EDM'smanagement who agreed that improvements are required. EDM's management hasrecognized that part of the problem was due to shortages of skilled, exper-ienced, and reliable management and staff. To overcome the organizationdeficiencies, as a first step, EDM has commissioned an ongoing organization,manpower and training study by EDF, due for completion by June 30, 1982(para. 3.15). The proposed project includes a technical assistance componentthat implements the recommendations of EDF's study (preliminary report) afterreview by S'ZI's management, the VRalian authorities and the Association.
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3.D8 Apart from the organizational and staffing problems, EDM's opera-tiDns are hampered by poor and difficult communicatiLons. Moreover, thecompany's past financial constraints (para. 6.04) resulted in totally inade-quate maintenance and a scarcity of spare parts and tools. Consequentlyservice quality deteriorated sharply (para. 2.06) and staff morale is low.Clearly EDM needs assistance to raise standards to acceptable levels. Inthe short term, this would comprise technical assistance, rehabilitationsupport, and consultancy (para. 4.03). To meet longer term requirements, theproject would support training for all staff levels through: (i) on-the-jobtraining of Malian counterparts by the technical assistance expatriates; (ii)training in Europe of Malian staff; and (iii) physical expansion of EDM'straining center, and expatriate support to increase the capacity and efficiencyof EDM's present training facilities and program (para. 3.16).
Staffing and Manpower Requirements
3.09 Staff are engaged and dismissed by the company's General Manager.At end 1980, total staff numbered 806, of which there were 20 engineers andexecutives, 145 technicians and 641 skilled and unskilled workers. Twohundred staff were working at headquarters, 410 at c:he Bamako unit and theremaining in various outstations. EDM has one employee for every 35 customersin both power and water, which is comparable ratio for the prevailing standardsin West Africa power and water utilities. 1/ Staff increased slowly by only0.5% per year from 1970 to 1976, but increased by 18% in 1977 and 5% in 1978.Since 1979 a hiring freeze has been imposed by the management to forestallover-generous staffing, as a result of which the total staff has declined by59 persons since then.
3.10 In general, new staff are hired under the existing Personnel Statute(Convention du Personnel) dating back to 1959 which comprehensively coverssalaries and conditions of employment, which were in line with practices oftenfound in other utilities in French speaking countries but now needs majorrevision. Some senior staff also retain their civil servant status by beingsimply "seconded" by their Government administration. A new personnel statutehas recently been negotiated between EDM's management and its staff butrequires the Ministry of Tutelle's review and approval before implementation.Due to ministerial changes and the need to coordinate a coherent personnelpolicy for all nationalized enterprises, approval is still awaited by EDM.
Training
3.11 EDM has only a few well-trained and competent power engineers. Manyof the younger power engineers or administrative managers have been trainedlocally, mostly at ENI (Ecole Nationale d'Ingenieur) or ENA (Ecole Nationaled'Administration), whilst others have received basic engineering training inEastern Europe. However, most require additional training before they canbe really efficient in their present positions. There are a few well-trained
1/ Benin 1 to 30 (power and water, 1979), Senegal 1 to 47 (power, 1977).
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and experienced technicians working mainly in the power sector. The oldertechnicians who learned on the job lack theoretical knowledge, while newlyappointed technicians, mostly graduates from the local ECICA (Ecole Centralepour l'Industrie, le Commerce et l'Administration), lack practical experience.At the blue collar level, skill is often minimal and the management estimatesthat almost half the total staff are illiterate. The proposed project willaddress the illiteracy problem through the training component.
3.12 There are no specific training facilities in Mali for water plantand water network management and maintenance. In addition, qualified plumbersare very few and very difficult to hire under prevailing labor market condi-tions. Adequate staffing of its water operations constitutes a crucialproblem for EDM-s management. Consequently, the training component of theproDosed Droiect would specifically address the water sector needs.
3.13 Training has always been a crucial problem for EDM because of thegenerally low qualification of its staff and the complete lack in Mali ofsome categories of specialists required for power and water operations(paras. 3.11 and 3.12). In 1965 EDM. with EDF's assistance, opened a trainingcenter in Bamako to address these needs. The first programs were mainly aimedat training of diesel and power network specialists through long-durationseminars (18 months). When the need for such specialists was felt to havedecreased, around 1970, training was focussed on literacy programs and shorterprofessional seminars extended to accounting and administration staff.However, by the mid-seventies the center's activities had both diminished anddeteriorated following the lack of equipment, and a lack of commitment byEDM's management.
3.14 In 1979 EDM reactivated the training activities with the assist-ance of two experts seconded from EDF. The center was rehabilitated andincentives instituted to attract junior staff interest in training; thetraining service was also placed under the General Manager's direct respon-sibility. Training activities have been reoriented toward the neglectedtechnical fields, and a special program has been set up to broaden the prac-tical experience of younR technicians hired from the local ECICA. During thatyear, the center's activities were substantial and included 353 man-weeks oftraining, and 225 man-weeks of upgrading. In addition, consistent with atraining policy followed for years by EDM, nine engineers and technicians weresent for training to power utilities abroad for one- to three-month trainingperiods as part of the Company's upgrading program. However, the currenttraining capacity of EDM falls short of the substantial needs. Water sectoractivities are almost ignored, and the integration of training programs tooperations should be improved. Moreover, training equipment shortages hampereffective training.
3.15 In order to assist EDM to formulate a personnel and trainingprogram, the ongoing EDF organization, manpower and training study (para.3.07) includes: (i) assessment of EDM's organization; (ii) assessment ofmanpower requirements and training needs; (iii) design of adequate trainingprograms; and (iv) plans for extension of EDM's existing training center toprovide for the needs of both the power and water sectors. A preliminary
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report was available and reviewed during the appraisal mission, and was foundsatisfactory for power sector activities. In addition, a Bank appointedwater sector training specialist complemented EDF's work and prepared detailedandb costed manpower and training requirements through 1985. While hisproposals need to be reduced to account for the small involvement of thisproject in water supply, the consultant's recommendations have been discussedin the field, and will be incorporated in EDF's global proposals to be imple-mented under the project.
3.16 Following joint discussions with Malians and CCCE/FAC, the IDAappraisal mission concluded that training activities should be more closelylinked to operations. Therefore, a large part of training would be accom-pl:ished on the job under the supervision of the expatriate technical assistants.Nevertheless, three full-time training specialists who will be part of thetechnical assistance team will be financed under the project to assist theMalian chief training officer and to implement EDF's manpower and trainingstudy recommendations. Financing to extend and to aLdequately equip thetraining center is also included in the proposed prcject.
Technical Assistance
3.17 In the mid-60s an agreement was negotiatedl between EDM's managementand FAC to provide financing for technical assistance. This assistancecoasisted of the provision of middle management staff, mainly seconded fromEDF, who have been employed in production, distribution, accounting andtraining. For the past several years, lack of commitment both by EDM'smanagement and by their French counterparts has caused the quality and bene-fits of this assistance to deteriorate. At appraisal, only three positionsout of five available were filled.
3.18 Clearly this technical assistance, which was introduced in the mid-60s, no longer suits EDM's needs and as a result has not been able to preventthe erosion of EDM's operations. EDM's management, a CCCE/FAC/ EDF mission,and the appraisal mission jointly reviewed EDM's problems and concluded theywere due to a combination of factors: (i) the inadequate caliber of theassistance provided; (ii) the insufficient number of expatriate techniciansonly in advisory positions; (iii) the lack of coord:Lnation between assistants;(iv) EDM management's lack of commitment; and (v) EDM's financial difficulties.The present trend in declining operating standards must be reversed by rein-forcing both the level and scope of technical assistance, and by supplementingthis assistance with adequate consultancies. The appraisal mission noted thateven the best among the Malian personnel become rapidly discouraged by thevolume and magnitude of the problems encountered in their work, and as aresult, the normal on-the-job training is not available. The only way toreverse these trends is to help the company operate satisfactorily again.
3.19 However, since introducing a large team of relatively well-paidexpatriates could result in a general "giving up" by local staff who couldget the feeling of a "takeover" by foreigners, a preliminary agreement wasreached in Bamako between the Government, EDM's management, and the IDA andCCCE/FAC/EDF missions on a limited but highly experienced team of 13 managers/technicians. The Government and EDM, with IDA's support, expressed the desire
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that the technical assistance be provided by one entity and that could be EDF.EDF were preferred because of : (i) their experience and well establishedcompetence in technical assistance; (ii) their knowledge of local problems;and (iii) the significant share of the related cost which will be borne byCCCE and FAC. Farming out of the services to EDF would of course be subjectto the conclusion of a satisfactory agreement between them and EDM on indi-vidual terms of reference for the expatriates, general conditions concerningEDF's performance, and prices. Further discussions concluded that expatriateswould be integrated into the organization and given direct operational respon-sibilities, and each of them would be assigned one or several Malian counter-parts to train, such training role to be included in their terms of reference(see Annex 3.2 and Project File). Close monitoring of this program would becarried out jointly by EDM's management and EDF. The technical assistanceteam would also be supported by a number of studies and programs to be financedby the project (para. 3.21).
3.20 Specifically the technical assistance team to be financed under theproject would consist of:
- 1 qualified chief accountant to head the Financial and Accountingservice;
- 1 customer specialist to head the customer division;
- I data processing specialist;
- 1 power generation engineer specialized in diesel generation;
- I diesel technician;
- 1 water supply engineer to become the deputy chief of the watersupply department;
- 1 water supply technician;
- 2 construction engineers to staff the Engineering Department;
- 3 technical teachers (1 diesel specialist, 1 water supply specialistand 1 power supply specialist) one of them to become the deputychief of the training department;
- 1 experienced project manager to be in charge of the coordination ofthe project including supervising its implementation and reportingperiodically to cofinanciers. This "coordinator" would reportdirectly to the General Manager, and would be recruited independentlyof the team provided by EDF. He would also serve as the GeneralManager's adviser. Terms of reference of this co-ordinator wereagreed with the Government and EDM during negotiations.
Housing for expatriates is difficult to obtain in Bamako and EDM has only threehouses appropriate for members of the technical assistance team. In order toprovide residential accomodations for the balance of the team 10 prefabricatedhouses would be financed under the project.
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3.21 Studies and actions to be carried out by specialized firms withinshort term assignments (para. 4.03), and financed under the technicalassistance package would include:
(i) inventory of service connections to update EDM's customers files andaccounts, review of EDM's billing system, and organization of aCommercial Department;
(ii) assistance to review and strengthen EDM's accounting procedures;
(iii) assistance in the optimal operation of the Bamako system, whichinvolves two hydro-plants and a diesel plant;
(iv) assistance in organizing a preventive maintenance system for bothpower and water;
(v) assistance in building up a short-medium t:erm planning capabilityfor the power and water sectors and; financing of a study onmedium/long term system planning to:
- determine the optimum development of the Bamako power systeminto an interconnected grid in southern Mali;
- assess medium-term rural electrification needs and makeproposals for a realistic rural elect:rification plan;
(vi) power and water tariff studies (para. 6.12); and
(vii) studies of: (i) the advantages and disadvantages of continuing theconcession system for EDM (para. 3.03); (ii) the advisability ofsplitting the water and power activities and managing them separately(para. 2.07); and (iii) the merits of unit:ing the power activitiesof Selingue authority with a strengthened EDM into a single entitywith investment planning and financing responsibilities (para. 2.07).
Terms of reference for the technical assistance package including thesestudies and actions are satisfactory to the Association and are detailed inth,s rehabilitation plan prepared by EDF (Annex 3.2 and Project File). Everyeffort will be made to reduce the number of consulting firms involved in theprovision of the services listed above, in order to minimize the coordinationburden on EDM. During negotiations, EDM and the Government have agreed to thetechnical assistance package (described above in paras. 3.19 to 3.21).
Me_ering, Billing and Collection
3.22 EDM's Billing Department shows 28,000 power customers and 14,000water customers, of which 18,500 for power and 9,500 for water are in Bamako.The accuracy of these figures has been questioned by the auditors (para. 3.25)since figures for recorded connections given by technical services are signi-ficantly higher. In addition, EDM's management assumes that there is alarge number of non-registered customers, particularly for water. A recent(1979) CCCE-financed program using an expatriate expert supported by EDM
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staff was aimed at updating the company's customer files for Bamako, butfailed due to lack of sufficient personnel and material means. Experience inCameroon and Gabon suggest that this type of task is better conducted by aspecialist consulting firm without reliance on the utility's own staff.Financing of block-mapping and updating of customers' files for the Bamakoarea by a specialized firm is included in the project (para. 3.21).
3.23 Meters are read monthly. Whilst most of the power meters are inworking condition, approximately two-thirds of the water meters are inopera-tive and corresponding customers are charged minimum amounts. Power andwater billing for Bamako and outstations is computerized and performedby EDM. EDM recently replaced its old computer, following numerous failureswhich contributed heavily to the disruption of the company's commercialactivity. The new replacement has been operational since June 1980. ForBamako, bill collection is done at headquarters and at four new collectionoffices, the opening of which was part of a plan by EDM to ease specificBamako collection difficulties. Bill collection at the outstations is doneby local units. As a result of EDMi's current organizational problems and thepresent general economic difficulties in Mali, collection has been poor auringthe last few years. The proposed project addresses the organizational proDlemsthrough the provision of technical assistance (paras. 3.20 and 3.21).
Accounting and Information System
3.24 EDM's accounting system is based on accrual accounting principlesusing the Malian Chart of Accounts which has been derived from the 1957French Chart. According to the concession system, Government and customerfinanced assets in the "public domain" are recorded separately in an annexto EDM's balance sheet but corresponding renewals provisions are charged tothe company operating account (para. 6.02). EDM has a simplified cost-accounting system and shows separately operating accounts for power and water.Accounting work is partially computerized on EDM's own computer.
3.25 A PPF-financed audit of EDM's 1977 accounts revealed serious defi-ciencies and the auditors were unable to form an opinion on the accounts.Major problem areas were in the recording of fixed assets, receivables andcurrent liabilities. Problems with recording of fixed assets primarily relateto Government failing to formally transfer to EDM new water assets in the"public domain" (para. 6.03); poor recording of suppliers' accounts, customers'accounts as well as Bank and Postal accounts. EDM's method of apportionin8indirect cost between the power and the water sectors is also somewhat arbi-trary and does not truly reflect the incidence of costs of each sector; thismethod requires improvement. In general, current accounting procedures areweak and staff need upgrading. Accounting deficiencies are partially respon-sible for EDM's present serious financial problems.
3.26 Improvement of EDM-s accounting system implies in the short termthat new and safe procedures be defined, that specific actions be taken todeal with accumulated past delays and errors and that in the long term,adequate on-the-job training and support is provided to the accounting staff.As part of the general technical assistance the proposed project would financeassistance by a qualified accounting firm to:
(i) review existing accounting and billing procedures and computerprograms;
(ii) define new procedures;
(iii) deal with past customer receivables and past supplier payables;
(iv) reconcile current assets and liabilities;
(v) prepare assets register and review depreciation policy;
(vi) improve cost accounting.
In addition, the project would also finance an experienced professionalaccountant to head EDM's accounting service for four years and train itsMalian counterpart. In order to allow separated financial management of thepower and the water sectors, during negotiations, ED)M's agreement was obtainedthat separate accounts for power and water operations would be established anda complete cost accounting system will be implement(ed by January 1, 1984.
3.27 Budgeting. EDM does not have budgetary systems for operations orinvestments. Operational expenditures payments have been made in recent yearson a routine regular basis. However, with the present declining cash posi-tion, payments are now effected on an intermittent basis as and when funds areavailable. Lack of financial planning has contributed to the present finan-cial deterioration of EDM. The technical assistance accountant's terms ofreference will include setting up of a budgeting procedure coupled with amonitoring system to control operating and capital expenditures throughout theyeiar. Establishment of a technical planning capacity (para. 3.21 (v)) willfacilitate the preparation of future investment plans and financing plans.
3.28 Audits. Control of EDM's accounts is done by two "Commissaires auxComptes", one of whom is the Financial Controller of the Republic of Mali, andthe other is privately appointed by the Company. However this control doesnot address all aspects of the accounts and, as shown by the external auditre!cently performed (para. 3.25), is inadequate for IDA requirements. Conse-quiently, audits satisfactory to IDA will be required yearly. To help EDMovercome its current difficulties, financing for such audits has been providedunder the project for two years. In view of the current poor state of EDM'saccounts and the time required to significantly improve them, it is proposedthat EDM not be required to submit formal audited accounts for FY 1982. IDAwould be satisfied for that year with (a) a brief joint report on EDM's yearlyaccounts by EDM and the accounting consulting firm hired under the project,and (b) an external audit of the project related expenditure (para. 3.26).Assurances were obtained during negotiations that in addition to the above,st:arting with accounts for FY83, EDM will have its annual accounts audited byan independent auditor under terms and conditions satisfactory to IDA and thatthe reports would be made available to IDA within four months of the end ofeach fiscal year.
3.29 Insurance. Current insurance contracts cover, in theory at least,third party liabilities and risk to property and inventory. However, EDMhas been warned by its European insurers that values covered by currentc--tzacts may significantly differ from real values and that an updating of
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all properties insured is necessary. The poor state of the company's assetsregister and accounts in general constitutes a serious handicap to performsuch updating. During negotiations agreement was reached that EDM will submitto IDA by March 31, 1984 (i.e., 3 months after revaluation of assets) aproposal to adjust its insurance contracts, for IDA approval.
IV. THE PROJECT
The Program and the Project
4.01 The program to rehabilitate EDM (Annex 3.2) and to extend and improveits service coverage has been conceived in two phases, of which the first isthe proposed project for IDA financing. This first phase would be developedbetween 1983 and 1987 and would essentially seek to rehabilitate EDM's opera-tions and management, remove critical bottlenecks, support urgently neededextensions and, prepare the second phase to be executed during the 1984-87period. During appraisal the Government, EDM, IDA and the other lendersagreed that the proposed IDA project would consist of the following components:
(a) Technical assistance component
- Secondment of experts to strengthen EDM's management (para. 3.20)
- Studies and actions to be carried out by specialized firmswithin short-term assignments (para. 3.21)
- Physical facilities to house EDM's Bamako Unit (para. 3.06) anddata processing equipment
- Extension of EDM's training center (para. 3.08)
- Construction of 10 pre-fabricated houses to accomodate thetechnical assistance experts
(b) Power component
- Rehabilitation of the Dar Salam diesel electric power plant inBamako during 1984 to 1987
- Installation of powerline carrier communication from Selingue'ssubstation at Balingue to Sotuba and Dar Salam power plants
- Reinforcement and extension of Bamako's distribution system
- Construction of a biomass power plant at Mopti/Sevare
(c) Water supply component
- Resolution of main bottlenecks in distribution and productionfacilities in Bamako
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(d) General plant component
- Supply of vehicles, tools and instrumLents for EDM's operationsthroughout Mali
(e) Technical studies component
- Pre-construction design for extension of the Sotuba hydro-electric power plant
- Pre-construction design for the Bamako-Segou transmission link
- Pre-construction design for extension of water supply faci-lities in Bamako
(f) Other
- Refinancing of PPF
Program Objectives
4.02 The rehabilitation and extension program, as conceived, aims at:(i) institution building by alleviating EDM's managerial and operationalconstraints; (ii) ensuring improvement and increased water and power supplyto Bamako's population; (iii) extending the service area to be suppliedby hydroelectric energy from Selingue to replace costly diesel electricgeneration; (iv) supplying electric power for rural loads in the Segou area;and (v) using agricultural residues for electric power production in theMopti/Sevare area with consequent savings of imported gas oil. The bene-ficiaries of the program would be: (i) for the power and water component inBamako, the city's inhabitants, particularly people with medium and lowincomes; (ii) for the power transmission study component, Segou/Markala andFana/Dioila inhabitants and industrial users, as weLl as rural loads withinthe "Office du Niger" 1/ area of operation; and (iii) for the biomass powerscheme component, Mopti/Sevare's inhabitants and farmers.
Project Composition
Technical Assistance Component
4.03 The technical assistance component is designed to rehabilitate EDM,to strengthen EDM's management, and to supply on-the-job training to itspersonnel. The extent of the technical assistance (52.5 man-years of experts'services) its composition, and its duration (four years, except for theproject coordinator 4.5 years), have been discussed with CCCE, FAC, and
1/ The "Office du Niger" is a governmental authority responsible foragricultural production in 60,000 ha. of irrigated land downstreamof the Markala barrage on the Niger river.
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agreed upon with the Malian authorities (paras. 3.17-3.21). In essence, thetechnical assistance will consist of a team of experts to advise EDM's manage-ment and to help manage the water and power utility. The experts will beseconded mainly from EDF (para. 3.04). To complement the work of this tech-nical assistance team, several specific tasks and studies will be carried outby specialized firms as explained in para. 3.21. The technical assistancepackage will include necessary offices and accommodations for the experts, twobuildings to properly house data processing equipment and Bamako's operationalunit, and 10 housing units to lodge the technical experts. EDF will assumeoverall responsibility for the success of the technical assistance team.
Power Component
4.04 The Dar Salam diesel electric power plant in Bamako is in precariouscondition; most of the units are out of commission for various defects and thefoundation blocks of two units will have to be recast. The project providesfor the complete overhaul of units that can be repaired, spare parts, recastingof foundation, and repair of building. In addition, funds are provided toinstall a unified control board, since at present control of units is dispersedat various locations in the power house which makes operation difficult. Thedecision to install this control board will be based on an engineering studyto be commissioned by CCCE which is financing 90% of the Dar Salam rehabilita-tion.
4.05 The "Autorite de Selingue" has installed a power line carrier commu-nication system between the hydro plant at Selingue and the Balingue substa-tion at the Bamako end of the 150 kV transmission line. Nevertheless there isonly precarious radio communication between Balingue and the power plants atBamako, Sotuba and Dar Salam. In order to control operation of the systemfrom Balingue it is necessary to extend the power line carrier communicationsystem to these two power plants using the existing 30 kV subtransmissionlinks. The project will cover the financing needed for this extension.
4.06 In February 1980 EDF completed a PPF-financed study for medium-termdevelopment of Bamako's power distribution system. The study's main objectiveswere: (a) to determine the configuration of the 30 and 15 kV distributionnetworks up to 1990; (b) to locate bottlenecks and propose solutions; and(c) to extend electric supply to new areas of the city. In terms of primarydistribution, and as a result of the study, the project consists of theaddition of: (i) a 30 kV underground cable link between Badalabougou substa-tion south of the Niger river and the Dar-Salam diesel electric power plant toreinforce the existing link which has suffered several defects; (ii) two new15 kV feeders out of the new Balingue substation, to reinforce the modifica-tions being done with CCCE-financing in the primary distribution of the cityby rerouting certain feeders to the Balingue substation; and (iii) a 30 kVoverhead link between the Sotuba hydroplant and Balingue. The project willalso extend the distribution system to ten new sections of the city 1/ withabout 5,000 potential customers.
4.07 EDF has prepared the conceptual design for the biomass power scheme.This scheme consists of the construction of a thermal power plant at Mopti/Sevare to use rice husks as fuel. The 2 MW power plant will have threedual-fuel engines burning a mixture of low-heat values gas (1000 kcal per m3)and 10-20% gas oil. The low-heat value gas is obtained by controlled combus-tion of rice husks in gas producers (one gas producer per generating set).The power plant will be located adjacent to the existing 13,000 tons per yearrice mill at Sevare which will be expanded in 1983 to 45,000 tons. Roughly25% of the rice paddy ends up as rice husks, and approximately one kWh isprc,duced per kg of rice husk burned in a power plant of the type describedabove. During the week preceding negotiations, we learned that the Cameroonbiomass project, the prototype for the proposed Mali project, is having tech-nical problems which relate to the quality of rice husks being used in theprocess. Electricite de France (EDF), consultant for the Cameroon projectand the Mali project, confirmed that a study to determine the exact nature ofthe problem will be completed by April 1982. Following this study a decisionwill be made by Mali and OPEC Fund (who is financing this plant) on whether toproceed with the Mali project. The prequalification. process for constructionof the Mali biomass plant, which will be completed in January 1982, hasgenerated considerable response with a wide range of variations proposed forthe process, thereby increasing the likelihood that the problems can be over-comne and the project started. In view of the high probability that theproblems will be solved, and at the request of the Malians and the OPEC Fund,with whom this matter was discussed during negotiations, IDA has agreed toretain this component in the project pending the outcome of the EDF study.
Water Supply Component
4.08 The small water supply component of the proposed project is intendedto resolve the most crucial material problems encountered in the operations ofthe Bamako water system, pending a larger participation in the second phase.It would consist by order of priority of: (i) reinforcing pumping stationssupplying treated water to the main network and, if need be, adding additionalraw-water pumping facilities for the new treatment plant (para. 2.15); (ii)converting the old treatment plant into a pilot filtration unit to investigatethe feasibility of continuous utilization of the Niger River after directfiltration only; (iii) supplying water meters and meter repair facilities;(iv) supplying and laying about 6 km of trunk and secondary mains for theimprovement of distribution flows to peripheral areas; and (v) providing spareparts and equipment to rehabilitate existing production facilities of EDM'ssecondary center systems in the course of a water supply training program.
General Plant Component
4.09 The general plant component consists of the provision of 22 vehiclesfor various purposes, a mobile maintenance shop, tools and instruments tore-equip EDM's maintenance shops and power plants, and office equipment.This general plant equipment will help assure the success of the technicalassistance team by providing material means which EDM now lacks.
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Studies Component
4.10 As indicated in para. 2.18, EDM plans to extend the Sotuba hydro-electric plant to supply additional power demand in Bamako between the commis-sioning of Selingue and Manantali. The studies included in the project willcover the pre-construction design of this extension and the preparation of acontractor-type costs estimate. The extension consists of enlarging the powerhouse to accommodate two 3.5 MW turbine generator units, and modifications tothe diversion works on the Niger river. With the planned extension, Sotuba'scapacity will be increased from 5 MW to 12 MW, and its generating capabilityfrom 38 GWh to 91 GWh per year.
4.11 The feasibility of a transmission link between Bamako and Segouwas investigated by EDF in 1972 and re-examined recently by a PPF-financedstudy. This study demonstrates that the transmission link is feasible. Thetransmission link would consist of a 235 km 150 kV line beginning at theBalingue substation in Bamako. A 150/15 kV substation is planned at Segou,as well as a 150/30 kV substation at Fana to supply Fana, Dioila, and twocotton ginning mills. The cost of engineering services to design the trans-mission link and to prepare tender documents is included in the project.
4.12 The preparation of detailed design for a first stage extension andreinforcement of the Bamako water supply production and distribution would beincluded under the proposed project. This follow-up of the completed MasterPlan financed under the PPF would enable DHE and EDM to obtain precise figureson the amount of distribution extension and cost estimates.
Project Management
4.13 A project coordinator who will be an experienced manager withengineering background, recruited internationally on terms of referencealready agreed with the Association, will be responsible for supervision ofoverall implementation (of both power and water components) and liaison withthe IDA and the other donors. The project coordinator will report directly tothe General Manager. His recruitment is underway and he is expected to assumehis responsibilities by the time of effectiveness of the proposed project.EDM's construction supervision capability would be reinforced by the presenceof two expatriate engineers also provided within the technical assistance teamof experts, who will be assigned to the Engineering Department. In additionEDM agreed to use consulting engineering firms to supervise the constructionworks financed under the project, since these works require engineeringdesign, construction supervision, and inspection which exceed largely thenormal capability of EDM's staff even with the assistance of these twoexperts. These construction works are:
(i) rehabilitation and extension of the Bamako electric distributionsystem;
(ii) construction of a biomass power plant in Mopti/Sevare;
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(iii) urgent works on the Bamako water supply system;
(iv) construction of new building to house the Bamako unit;
(v) construction of new building for data processing activities;
(vi) extension of a communication system between Balingue and Sotubaand Dar Salam power plants;
(vii) extension of EDM's training center; and
(viii) construction of 10 houses to lodge expatriate technical assistancestaff.
Project Costs
4.14 The project comprises the five components described in paras. 4.03tc 4.12 and the refinancing of the 1979 PPF advance of US$0.97 million; itsestimated cost totals US$43.20 million, of which US$41.25 million is inforeign exchange. The cost estimates on the basis of the most recent avail-able data, including contingencies and repayment of the PPF advance, aresummarized in the following table. During negotiations, the Government hasconfirmed its intention to exempt the project from duties and taxes, whichhave been excluded from these costs.
2. Power Component:- Rehabilitation of Dar Salam power plant - 3.53 3.53- Power line carrier communication fromSelingue's substation at Balingue withSotuba and Dar Salam power Plants - 0.24 0.24
- Reinforcement and extension of Bamakodistribution 0.56 5.06 5.62
- Mopti/Sevare biomass power plant 0.53 5.03 5.56
3. Water Supply Component:- Urgent Works in Bamako's Water SupplySystem 0.19 1.65 1.84
4. General Plant Component:- Vehicles, Tools and Office Equipment - 0.82 0.82
5. Studies Component:- Pre-construction design of extension to
the Sotuba hydroelectric plant 0.08 0.76 0.84-Pre-construction design of the Bamako
to Segou transmission link 0.08 0.74 0.82-Pre-construction design for extensionof water supply in Bamako 0.08 0.74 0.82
6. Engineering and Construction Supervision 0.19 1.37 1.56
Total Base Line Cost (mid-1981 Prices) 1.71 33.53 35.24
4.15 The base line costs in terms of mid-1981 prices, for the powercomponent have been supplied by EDM's consultants, EDF (in terms of 1980prices), reviewed and adjusted to mid 1981 by the Association. Base linecosts for the water supply component are firm and cover the crash programment:ioned in para. 4.08. For the studies component of the project, base linecosts have been computed at an average cost of US$14,500 per man-month for atotal of 154 man-months of consulting engineering services. Cost of personnelfor technical assistance (52.5 man-years of experts) has been based on currentEDF prices (see para 4.16 on technical assistance financing). A breakdown ofteclnical assistance costs is shown in Annex 4.1. Th,e engineering servicescosts for detailed design and construction supervision have been computedseparately for each construction work component. The estimate includes physi-cal contingencies for the power component, amounting to 10% on civil works andequipment. To take into account cost escalation, price contingencies havebeena provided at the rate of 9% for 1981, 8.5% for 19i82, and 7.5% for 1983 to198.5 and 6% thereafter.
Project Financing
4.16 The financing plan for the proposed project: assumes that the foreignexchange cost will be financed by foreign loans. CCCE and FAC have agreed tofinance jointly 50% of the combined cost of the technical assistance component,and the rehabilitation of Dar Salam power plant, thal: is US$10.8 million.FAC has agreed to provide $4.8 million equivalent on grant basis while CCCEwill provide $6.0 million equivalent at about 5% interest for 15 years includ-ing five years of grace. The exact terms of the CCCE loan are yet to befinalized, however, they are not expected to be subslantially different.This has been confirmed during negotiations. Of the technical assistancecomponent IDA would finance: (a) the services of an expert to act as projectcoordinator, the services of two construction engineers (one civil and oneelectric) and the services of a chief accountant to head the Financial andAccounting Services (paras. 3.20, 4.13 and 4.17); (b) the services of con-sulting firms to update customers files and accounts, review EDM's billingsystem, organize a Customer Department including follow up personnel; carryout power and water tariff studies; review and strengthen EDM's accountingservices; assist in organizing a preventive maintenance system for both powerand water supply; assist in building up a short, medium and long-range planningcapability; study the merits of uniting power activities in a single entity;and. study the advantages and disadvantages of the concession system for EDM;(c) overseas training of EDM's staff; (d) EDF's fee for supervision of thetechnical assistance team; and (e) the construction of buildings to houseEDM's Bamako operations and data processing activities, and an extension ofthE Training Center to house water supply related activities. CCCE and FACwouLld finance the technical assistance team (except the project coordinatorand three other experts financed by IDA), and housing for technical assistanceexperts as listed in Annex 4.1. IDA would finance approximately 10% of thecost of rehabilitation of the Dar Salam power plant. OPEC Special Fund hassigned a loan agreement with the Government of Mali for US$6.45 millionat no interest for 20 years including 5 years of grace, to finance theMopti/Sevare biomass power scheme. In the financing plan shown in Table 4.2below it has been assumed that the Association would cover the balance requiredto fund the foreign exchange requirements of the project.
3. Water Supply Component:- Urgent Works in Bamako'sWater Supply System 2.00 - - 0.20 2.20
4. General Plant Component:- Vehicles, Tools and OfficeEquipment 0.98 - - - 0.98
5. Studies Component:- Pre-Construction Design ofExtension to the SotubaHydroelectric Plant 0.80 - - 0.10 0.90
- Pre-Construction Design ofthe Bamako to SegouTransmission Link 0.78 - - 0.10 0.88
- Pre-Construction Designfor Extension of WaterSupply in Bamako 0.80 - - 0.10 0.90
6. Payment of PPF Advance 0.97 - - - 0.97
TOTALS 24.00 10.80 6.45 1.95 43.20
Project Execution
4.17 As explained in para. 4.13 a Project Coordinator will be providedunder the technical assistance component to manage the project's implementa-tion. EDM plans to employ EDF to prepare detailed design and to supervise theconstruction of the biomass power plant at Mopti/Sevare and of the extensionto the Bamako electric distribution system. For the water supply component,EDM plans to continue with the services of the consulting firm SAFEGE, whichprepared the Master Plan for the water supply of Bamako. The supply of equip-ment and construction of civil works will be done by contractors. Engineeringconsultants will be employed by EDM to carry out the different studies con-templated in the studies component of the project. These arrangements havebeen confirmed during negotiations.
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Project Implementation Schedule
4.18 The prompt setting up of the technical assistance support to EDMis necessary before any of the physical or study components of the project arestarted. In agreement with CCCE and FAC, and in line with the EDF-designedrehabilitation plan (Annex 3.2) a detailed scheduling of the technical assis-tance personnel required has been prepared by EDF. This work is being financedout of an existing CCCE loan to EDM. On the assumptLion that the projectcoordinator (whose recruitment is now underway), could be recruited during thelast quarter of 1982 and that the main group of technical assistants could bemobilized by early 1983, the power, water supply technical assistance andstudy components could be started by late 1983 and finished by June 1987.Since thermal power for peaking purposes will not be required in the Bamakoarea until 1987 the reconditioning of the power plant can be deferred until1984 and spread over three years.
Project Monitoring and Reporting
4.19 Monitoring criteria and reporting requirements have been discussedwith EDM during negotiations, and assurances were o01tained that EDM will submitreports to the Association on a quarterly basis. Annex 4.2 gives the proposedproject monitoring guidelines.
Procurement
4.20 All contracts for supply of equipment or civil works constructionwill be awarded as a result of international competitive bidding in accordancewith Bank Group Guidelines. The selection of consultants for the studiesincluded in the study component of the project will be done by EDM followingselection procedures agreed upon with the Association. For the technicalassistance component, the project coordinator will be recruited interna-tionally, and all other staff will be recruited through EDF. Regarding therehabilitation of Dar Salam, in view of the nature of this component, beingrehabilitation of existing equipment and purchase of spare parts, ICB wouldnot be required. Genuine local contractors for civil works will be eligiblefor the 7.5% margin of preference as stipulated in the IDA guidelines for bidevaluation.
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Disbursement
4.21 The proposed IDA credit would be disbursed as shown below:
Table 4.3: DISBURSEMENT OF IDA CREDIT
(i) Electrical works, equipment and installation 100% of foreign exchange(US$6.1 million)
(ii) Water supply works, equipment and installation 100% of foreign exchange(US$1.8 million)
(iii) Civil works (buildings for Bamako's operation 100% of foreign exchangeand for data processing and extension to expenditures or if purchasedtraining center, (US$1.67 million) locally, 80% of local expend.
(iv) Studies (US$2.14 million) 100% of foreign exchange
(v) Vehicles, tools, and office equipment 100% of foreign exchange(US$0.9 million)
(vi) Services of consultants, experts and special- 100% of foreign exchangeists, fellowships (US$7.59 million)
(vii) Rehabilitation of Dar Salam power plant 10% of foreign exchange(US$0.43 million)
(viii) Unallocated Credit (US$2.4 million)
In addition, the PPF advance of US$0.97 million would be refunded upon effec-tiveness of the Credit. Withdrawal requests for disbursement would be fullydocumented. Under category (vi) the IDA Credit would finance: (a) theservices of the project coordinator and three experts; two constructionengineers and one accountant; (b) the service of consulting firms to carry outvarious management and policy studies and to provide assistance as detailed inpara. 4.16 and Annex 4.1; (c) overseas training for EDM's staff; (d) EDF's feefor supervision of the technical assistance team; and (e) the services ofconsulting engineering firms to prepare engineering design, supervise construc-tion, and perform factory inspection for the works listed in para. 4.13. Theestimated schedule of disbursement is as follows and is considered realisticfor this project:
Environmental Impact
4.22 The biomass power plant units would use low-heat value gas and gasoil, which are both clean burning fuels. About 20% of the rice husk ends upas ashes in the gas producer. At the rate of approximately one kg of ricehusk per kWh, generation of B QAh per annum would produce an estimated 1,600tons per year of ashes. These ashes will be disposed of by filling largedepressions at a short distance from the power plant.
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Table 4.4: PROPOSED IDA CREDIT DISBURSEMENT SCHEDULE
IDA FY and Quarter Cumulative Disbursement % of Credit
4.23 The risks involved in the implementation of the physical aspects ofthe project are no greater than normal for projects of this type, since allphases of work will be supervised by competent consultants acceptable to theAssociation. Regarding the biomass power plant, a decision will be made byMa:Li and OPEC Fund on whether to proceed with this plant, based on the outcomeof EDF's study to determine the exact nature of the problem experienced withthe Cameroon biomass project. However, the prequalification process for theconstruction of the plant, now underway, has generated considerable responsewith a wide range of variations in process, thereby increasing the likelihoodthat the project would be successful.
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4.24 Experience in West Africa with technical assistance to power andwater utilities indicates that concrete results can only be achieved throughsustained effort over a number of years. In EDM's case the massive technicalassistance included in the project can go a long way to arrest further deteri-oration of EDM's operations. Nevertheless, it must be recognized that thereis still risk of failure and that further assistance would be necessary insubsequent phases of EDM's development.
V. ECONOMIC JUSTIFICATION
Power Components
Rehabilitation and Extension of Bamako System
5.01 The Association has reviewed the electric demand forecast forBamako prepared by EDF for the period 1980 to 1990. According to thisforecast Bamako's power load is expected to increase from 81 GWh in 1979 to275 GWh in 1990. The forecast is shown in the following table:
Table 5.1: BAMAKO DISTRIBUTION
Actual and Projected Electricity Supply and Peak DemandActual Forecast Growth Rate %
Power Service in Bamako has been heavily curtailed in the last few years bybreakdowns of the generating units of the Dar Salam plant, due to poor mainte-nance, and inadequate distribution capacity. A number of power users had toinstall and run private diesel electric power sets. This situation wasexpected to improve with commissioning of Selingue but in fact demand appearsto have been static in 1980 and 1981. The EDF forecast has therefore beenrecast to show a 10% increase per annum from EDM's current forecast for 1982(see Annex 2.1). The project provides funds for expansion of the distributionsystem and rerouting of the main supply feeders in Bamako which will providethe basis for further growth in demand.
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5.02 The rehabilitation of the Dar Salam power plant when compared withthe only alternative of adding new plant, presents the least cost solution tomeet the generation reserve required.. This plant when reconditioned at acost of $3.5 million will defer major expenditures on additional generating
plant to meet the peak demand until about 1992 at realatively little cost infuel for the short period it will be required to optsrate on the daily peak forthe two or three months of the dry season each year.
5.03 The rate of return on investment in the distribution system (whichcomprises 17.0% of total project cost) has been calculated by equalizing the
present worth of costs (investment and direct operating expenses) and thepresent worth of benefits. The benefits have been valued as the incrementalsales over the 1984 base at the average price currently paid by the ultimateconsumers. After 1985 the benefits are kept constant because a new extensionwill be necessary to accommodate the increasing load in the distribution
system. In the costs calculations, energy up to 19,35 is taken at the oppor-tunity cost of energy supplied from Selingue which is zero, since Selingue isa sunk cost. After 1985 the energy cost is taken at the long term marginalcosts, which is the cost of energy produced by the (extension of Sotuba whichis the next least cost source of power (para. 2.18). Incremental cost ofoperating the distribution system extension, financed under the project, istaken as the variable expenses in distribution adjusted upward to reflectadequate maintenance. On this basis, the rate of return for the proposedinvestment is computed at 21% using current tariff 'Levels as proxy forbenefits. Annex 5.1 shows the tabulation of costs and benefits and theassumptions used in the calculations.
Mopti/Sevare Biomass Power Scheme
5.04 The only alternative to the proposed biomass power scheme is apurely diesel electric power plant burning diesel oil. The diesel units(500 kW) in the existing power plant are completely worn out and would haveto be replaced. This power plant is located over an embankment adjoiningthe dike connecting the island of Mopti with Sevare. Serious settling hasoccurred in the structure of the power house and foundation of the sets sothat any expansion of capacity will have to be done elsewhere. Due to thecondition of the diesel units and lack of sufficient generating capacity,less than one-third of Mopti/Sevare's power requirements are being met byEDM's power plant. Private power plants supply all industrial loads and thewater supply treatment plant. The demand forecast laas been prepared by EDFtaking into consideration the supply to these loads, once the new powerplant is commissioned. According to this forecast, power load in EDM'ssystem is expected to increase from 1.4 GWh in 1979 to 8.2 GWh in 1990.The forecast is shown in the following table:
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Table 5.2: MOPTI/SEVARE SYSTEM ELECTRICITY DEMAND FORECAST
The forecast takes into account an exceptional increase in demand in thefirst year caused by the phasing out of private generators when the biomassplant is commissioned early in 1982 and public supply is satisfactory.
5.05 The least-cost comparison has been made by equalizing the presentworth of costs for both alternatives, the biomass plant and the diesel electricplant. Since the rice husk burned in the biomass plant is an agriculturalwaste, with no other use, its opportunity cost is zero. In the biomassalternative, up to 20% of the fuel burned will be diesel oil and has beenpriced accordingly. The equalizing discount rate, assuming an increase ofdiesel oil cost at 3% per year, is computed at 25%. The rate of return ofthis component is computed at 11% using current tariff levels as proxy forbenefits. Annex 5.2 shows the tabulation of costs and benefits and theassumption used in the calculations.
Water Supply Component
5.06 The investment carried out for water supply under the Project wouldcomplement the ongoing works on the treatment plant financed from the KfWcredit. Whereas the latter consists of extending the production facilities,the project investment would supply and install the necessary pumping instal-lations and distribution network to make the water available to customers.Areas would be selected which so far have not benefited from a distributionsystem or from adequate water pressure in their neighborhood. As a result,the project would, with a minimum amount of investment, benefit approximately60,000 people who thus far had to rely on unsafe and more expensive sources ofwater supply, and increase the reliability of service to the 150,000 peoplealready served. Using current water tariffs as proxy, the net benefits fromthe projected additional water sales have been calculated to yield a rate ofreturn of 11% on the proposed investment. Annex 5.3 shows the tabulation ofcosts and benefits and the assumptions used in the calculation.
Technical Assistance
5.07 The massive technical assistance component (about 50% of totalproject costs) obviously would be instrumental in bringing about the projectedimprovement in EDM's institutional capabilities and efficiency. However,
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because of the comprehensive and pervasive nature of this technical assistance-concerning as it does both power and water supply operations and mainlyinstitutional improvements per se-it is not possible to meaningfully allocatepart or parts of it to the specifically revenue producing components of theproject. Nor would it be meaningful to lump these revenue producing projectstogether, add some arbitrary proportion of the techrLical assistance into theirjo:int costs and calculate an economic rate of return on that basis. There-fore, the costs of technical assistance are here left entirely out of accountas not being quantifiable in terms of EDM's future efficiency and revenuegenieration.
VI. FINANCIAL ANALYSIS
Introduction
6.01 In March 1980, Audit Continental (France), a correspondent of Peat,Marwick, Mitchell & Co., prepared a report on EDM's finances based on the dataas of December 31, 1977. That report plus some unaudited information obtainedfrom EDM, form the basis of IDA's review of EDM's past financial achievementsand present financial position. This chapter summarizes the available informa-tion and gives indications of the magnitude of the company's future financialrequirements. However, with regard to the numerous accounting deficienciesalready pointed out in this report (para. 3.25), each of the figures belowshould only be considered as indicative. In general, orders of magnitude areplausible but a large possibility of error remains. As a consequence, thebasis for designing a financial recovery plan is not: available at the momentand the project focuses rather on two basic objectives: (i) improvement ofEDM's accounting and commercial organization; and (ii) securing enough localfunds for the proposed project.
Background: Status of Assets in the Concession System
6.02 In accordance with the normal practice of the concession system(paras. 3.02 and 3.03), EDM owns only part of the assets it operates, whichit depreciates on a straight line basis. The remaining assets are consideredpart of the "public domain" and are "conceded" to the company for the durationof the concession. "Public domain" assets may be financed either by theGovernment or consumers, or by EDM itself. "Public domain" assets which havenot been financed by EDM are recorded in an annex at:tached to the annualfinancial statements. EDM-financed assets in the "public domain" are shownin EDM's balance sheet as expenditures incurred on behalf of the Government.In order to be able to surrender all assets in the "public domain" in goodworking condition at the end of the concession as required by the concessionagreement, EDM charges to its operating account a renewals provision calculatedon the historical values and useful lives of the corresponding assets. Also,for public domain assets financed by EDM, the company is entitled to amortizeits investment over the duration of the concession through provisions chargedto its operating account; for these assets a double amortization charge is
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reflected in the income statement and balance sheet. Starting with thebalance sheet for the period ending December 31, 1984, the double amortizationis assumed to be eliminated as a result of the government decisions based onthe proposed concession system study (see Annex 6.6).
6.03 In the early 1960's, the Government undertook the construction ofthe Sotuba hydroelectric scheme and transferred it when completed, includingthe related debt and debt service, to EDM as an additional EDM-financed"public domain" asset. In the mid-1970's, the Government undertook theconstruction of the Selingue hydroelectric scheme which is not planned to betransferred to EDM, but instead will be operated by the Selingue Authority,l/from which EDM will buy power. All other power investments have been financedby EDM while all major water works so far have been financed by the Governmentand then transferred to EDM for operation as Government-financed "publicdomain" assets. However, for the last several years, adequate financialinformation about such Government-financed new assets in the water sector hasnot been provided by the Government to EDM, which has introduced, but onlyfor part of them, estimated values in its records. Therefore, calculationof the renewal provision in the water sector cannot be properly made andcorresponding capital replacements are underprovided for in EDM's accounts.Correct valuation of such fixed assets requires a direct inquiry into therecords of both the Ministry of Industrial Development and the Ministry ofPlanning. It was agreed during negotiations that by December 31, 1982, theGovernment will furnish to EDM appropriate values, e.g., book value, for allpublic assets operated in the water sector by EDM. These "values" will berevalued as a part of the overall asset revaluation excercise (para. 6.07).
1/ The Government has established a new organization to assume the functionsof the Selingue Authority to be called l'Office pour l'Exploitation desRessources Hydrauliques du Haut Niger (OERHN).
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Past Earnings
6.04 As shown by EDM's books, unaudited earnings for the power andwater sectors for FYs 77-81 are:
6.05 Revenues from power operations did not cover operating expenses inFY1979, whilst revenues from water operations did not cover operating expensesin any of the past five FYs. In FYs 78 and 79, when EDM introduced into itsaccounts the renewals provision for some of the "public domain" water assetsit operates, the operating deficit increased dramatically. Had adequatemaintenance been performed, both power and water sectors would have shownlarger deficits.
Present Financial Position
6.06 Using EDM's most recent provisional balance sheet as of December 31,1979, information given by DHE on the "public domain" water sector assets, andadjusted cumulated depreciation for the "public domain" assets, a summary ofthe assets and the liabilities of the two sectors as of December 31, 1979has been established and is shown below:
Table 6.4
EquivalentMF Million US$ Million
Assets
Net fixed assets: power 9,117 18.2water 8,608 17.2
17,725 35.4
Less Net Consumer and Governmentfinanced assets a/ 9,310 18.6
Net EDM Financed Asset 8,415 16.8
Work in progress b/ 736 1.5Current assets 4,866 9.7
14,017 28.0
Liabilities
Share capital and Reserves 7,223 14.4Long term debt 2,604 5.2Current liabilities 4,190 8.4
14,017 28.0
a/ Gross value is estimated at MF 14,300 million.
b/ No breakdown available; mostly relates to power.
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6.07 The net fixed assets above include assets in the "public domain"contributed by the Government or customers, which normally appear in theannex to EDM's balance sheet (paras. 6.02 and 6.03). Offsetting financing isshown as "Net consumer and Government Contributions". In accordance withMa:Lian law, all EDM's assets and the "public domain" assets are valued athistorical cost. Since some aspects of the concession agreement, for instancethe amortization of the company's financings for "public domain" assets,conflict with the principle of revaluation of assets, a formal revaluation inthe books of account will not be required. However, in order to allow soundmonitoring and management of its operations, EDM has agreed to annuallyrevalue assets in operation in the power and in the water sectors on a proformabasis, to allow calculation of rates of return on such revalued assets. Inview of the current lack of adequate records and the time required to assemblebasic data, agreement was obtained during negotiations that such initial proforma revaluation would be performed by December 31, 1983 for both the powerand the water sectors including the assets to be conceded by the Governmentunder the concession system to EDM (see para. 6.03) using a methodologysatisfactory to IDA.
6.08 Current assets as of December 31, 1979 include receivables amount-ing to about MF 4 billion (US$8.0 million). These debts represent about 8.5months of billing for FY79. They are owed by: private consumers, 60%;municipalities, 14%; national Government departments, 11%; and state enter-prises, 15%. At year-end 1979, the Government agreed to allow EDM to offsettaxes owed to Government against bills outstanding i-rom Government amountingto approximately MF400 million and, as a result, reduced its debt by approxi-mately half to about MF500 million. In addition, the recent improvement ofEDM-s computerized billing system helped reduce domestic customers' arrears.Further reduction of EDM's receivables would require the implementation of thespecific actions included in the proposed technical assistance component(para. 3.21(i)), and additional EDM and Government measures. During thenegotiations, the Government gave assurances in the form of a supplementalletter that (a) it has recently paid all its outstanding electricity and waterbills to EDM, and (b) in accordance with overall policy, it has authorized EDMto disconnect the delinquent consumers including the State owned enterprisesand municipalities. The Government gave assurances that it will continue topay its own bills on time and will continue to support the above disconnectionpolicy. More specifically assurances were obtained from the Government that(a) its budgets for 1982 and subsequent years will allocate its agenciessufficient funds for prompt payment of water and electricity bills, (b) bySeptember 30, 1982, municipalities and state agencies and enterprises willadapt procedures to ensure prompt payment, (c) beginning December 31, 1982,arrears by these agencies and enterprises will be kept at levels not exceeding2 months' billing, and (d) beginning June 30, 1983, arrears by the municipali-ties will be kept at levels not exceeding 2 months' billing. Assurances werealso obtained from EDM that it will carry out the above mentioned commercialimprovement program as detailed and scheduled in the rehabilitation planproposed by EDF, in such a way as to reduce overall consumer arrears to notmore than 3 months' billing by the end of 1982 and to not more than 2 months-billing by the end of 1983.
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6.09 Share capital and reserves amounting to MF 7,223 million (US$14.4million) are made up of EDM's equity capital of MF 100 million (US$0.2 million),government net investment contribution of MF 471 million (US$0.9 million),earned surplus, general reserve, and renewal provision. Long-term debtincludes debt related to the Sotuba dam which is part of the "public domain"but is being paid by EDM. Pending agreement with IDA on future of concessionsystem and tariffs, the Government has agreed to assume debt service relatedto public domain assets starting January 1, 1982 (see para. 6.14). Since nomajor renewals works in the "public domain" have been charged to the renewalsreserve, the corresponding amounts have over the years constituted a majorsource of funds for the company's new investment financing. The long-termindebtedness of the company illustrates that many of the new major works inthe water sector have been contributed to the company by the Government, andalso that EDM has financed from internal funds a significant share of itsinvestment in the power sector (see annex 6.6).
6.10 Current liabilities as shown in EDM's books include supplier'saccounts of MF 1,278 million (US$2.6 million), and short-term debt of aboutMF 2,100 million (US$4.2 million). Short-term debts mostly relate to taxesowed to the Government and mostly correspond to IAS tax on customers' arrears,funds provided to EDM on a short-term basis by CCCE and FAC to help easetreasury constraints, and commercial credits obtained by EDM from its sup-pliers. The level of this indebtedness is too high, and during the last fewyears suppliers have been reluctant to extend credit for supply. Thesefigures have been particularly questionned by the auditors, and the terms ofreference of the proposed technical assistance team include a specific actionto assess the level of the company's short term indebtedness (para. 3.26).
Tariffs
6.11 EDM has uniform national tariffs for power and water which haveremained unchanged for past several years, and a Government tax (IAS) of MF 20(USd4) per cubic meter, and of MF 2 (US40.4) per kWh is currently levied.Both power and water tariffs were increased by 30% effective March 1, 1980,and are expected to produce average revenues, net of IAS tax, of MF 69/kWh(US i13.8) and of MF 79/m3 (US415.8). Small domestic power consumers pay aflat rate of 74 MF/kWh (USJ14.8). Larger domestic consumers pay accordingto a declining-block structured tariff from MF 97/kWh (USd19.4) to MF 64/kWh(US412.8). Public lighting is charged to municipalities according to asimilar declining-block tariff with prices varying from MF 88/kWh (US417.6)to MF 59/kWh (US411.8). Small commercial consumers are charged a flat rateof MF 88/kWh, whilst larger commercial consumers pay a fixed charge accordingto their installed capacity with different unit rates for peak and off-peakconsumption. Industrial consumers also pay a fixed charge based on theirinstalled capacity, with unit energy prices varying from MF 80/kWh (US416.0)during peak hours to MF 45/kWh (US49.0) during off-peak hours. All aboveunit energy prices include the MF 2/kWh IAS tax. For water, all consumers paya flat rate consumption charge of MF 99 per cubic meter (USd19.8) IAS taxincluded, except for standpipe consumption which is billed to municipalitiesat MF 94 per cubic meter (USJ18.8) IAS tax included. Additional revenuesfrom meter rentals average MF 1.5/kWh (USe0.3) and XF 13/m3 (US62.6).
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6.12 Following commissioning of the Selingue dam and further expansionof EDM's hydrogeneration capacity (see Chapter II), Mali's power productionpattern will be completely changed, and power tariff structures will haveto be reviewed. Water tariffs will also have to be reviewed to take intoaccount investment plans, operating costs, debt service requirements andsocial aspects of water consumption. As agreed during negotiations, theproposed project includes financing of tariff studies for power and water,taking into account marginal cost of supply and financial requirements, tobe completed before December 31, 1983.
Revenue Covenant
6.13 Given the lack of adequate information, the definition of suitablelong-run financial objectives is difficult at this time for either the wateror power sectors separately or for EDM as a complete entity. As a, consequence,it is proposed that the definition of such targets be deferred until the timeof' the second phase of the rehabilitation program. In addition, with regardtc the poor service that EDM has been providing to its power customers, it hasbeen difficult to ask EDM to raise its power tariff, even though such tariffincrease appears to be urgently needed. However, since the recent introduc-tion of a reliable supply of power from Selingue will gradually improveservice in the Bamako area, a tariff increase should now become possible.During negotiations the Government and EDM agreed to the basic principlethat appropriate managerial and tariff actions should be taken so that EDM'sconsolidated net cash generation for the two sectors calculated as the dif-ference between consolidated revenues and (a) consolidated cash operatingexpenses, (b) consolidated debt service and, (c) consolidated working capitalrequirements, be at least equal to 10% for 1984 and each year thereafter oftotal capital expenditures for the year. Pending completion of the tariffstudy and subsequent agreement on tariffs, it is assumed in this report thatEDM will be responsible for the 10% internal cash generation related toEDM-financed capital expenditure only. The government will be responsible for1CO% of public domain capital expenditure during the same period. From FY84onwards EDM would satisfy the same net cash generation target but for thepcwer and the water sectors individually. This will allow EDM to generatesufficient cash to finance local costs of the proposed investment programwhich would allow the company to renew its past practice (see para. 6.09), apractice which proved to be beneficial since it allowed EDM to keep a certainamount of autonomy in a country where the Government has been facing persistentfinancial difficulties. In order to achieve the above minimum targets,the Government has implemented an 11% increase in EDM's electricit:y tariffsef'fective February 1, 1982. Furthermore, EDM will (a) by July 1, 1982,increase electricity tariffs by an additional 8%; (b) automatically adjusttariffs to cover any increases in the cost of purchased electricit:y;(c) automatically adjust tariffs to compensate for increases in the cost ofoperations due to inflation; and (d) by January 1, 1983, increase watertariffs by 10%. At the time of a subsequent loan, appropriate long-termarrangements would be adopted based on more accurate financial dat:a and thecompleted tariff studies.
- 40 -
6.14 The Government shall also assume as of January 1, 1982 the services,as to both principal and interest, of all debt incurred prior to such date forthe financing of power or water facilities in the public domain, as defined inthe relevant concession agreements, until otherwise agreed by the Borrower andthe Association on the basis of the results of the exchanges of views on thetariff and concession system studies included in the Project.
Financial Projections
6.15 Tentative capital investment requirements for the two sectors forthe period FY82-87, and tentative corresponding financial sources based on theassumption that the above revenue targets (para. 6.13) are satisfied, aresummarized in Table 6.5. Further details are given in Annex 6.5.
Table 6.5
1982 - 87 ---------MF US$million million %
REQUIREMENTS
Capital expenditures- project power 18,757 37.5
water 2,361 4.7s/total a/ 21,118 42.2 98
- others EDM-financed 477 1.0 2
Total capital expenditures 21,595 43.2 100SOURCES
Depreciation and renewals prov. 13,299 26.6 62Income before interest net of taxes 8,471 16.9 39
Total cash generated 21,770 43.5 101
less
Income Tax 1,434 2.9 7Increase in working capital 5,668 11.3 26Debt service 12,047 24.1 56
Net internal cash generation 2,621 5.2 12External sources- Proposed IDA credit b/ 11,995 24.0 55- Proposed cofinanciers 8,625 17.2 40
a/ PPF refinancing not included.b/ PPF refinancing included.
- 41 -
6.16 EDM financed capital expenditure for the two sectors for the periodFY82-87 totals about MF 21.6 billion (US$43.2 million). The proposed projectcapital expenditure of MF 21.1 billion (US$42.2 million), which provides MF18.8 billion (US$37.5 million) for power, and MF 2.3 billion (US$4.7 million)fo:r water would represent about 98% of EDM's total program for the power andwai:er sector over 1982-87 period. Power sector capital expenditures have alsobeen assumed for (a) the Bamako-Segou transmission line; (b) the first trancheof the extension of the Sotuba hydroplant; and (c) miscellaneous extensions ofdistribution and generation facilities in Bamako and in outstations (Annex6.5). However these are assumed to be fully financed by the Government pendingresolution of tariff and concession studies (see para. 6.13). Accordinglythese have not been included in the Table 6.5.
6.17 EDM's internal cash generation net of debt: service as a percentageof total capital expenditures is estimated to be above the minimum 10% for1982 through 1987. Further power tariff increases of 4% in 1985 and 7% in1986 and 12% in 1987 have been assumed in order to eliminate operating deficitand maintain a reasonable debt service coverage. These figures will be firmedup on completion of tariff and various accounting studies. Similarly, theinformation about composition of the investments in 1985 onwards will be knownbetter on completion of various studies which will be undertaken as a part ofthis project. Accordingly the 1985 onward data ref:Lected in Tables 6.4 and6.5 are very preliminary. The above level of internal cash generation wouldbe sufficient to cover all local costs which normally do not exceed 10% oftotal costs. Other requirements would be covered by:
(i) the proposed IDA credit of MF 12 billion (US$24 million); and
(ii) associated project cofinancing of MF 8.6 billion (US$17.2 million)- fulfillment of all conditions precedent to their disbursement willbe a condition of effectiveness of the proposed credit (para. 4.17).
Future Finances
6.18 Tentative income statements cash flow, and balance sheets for FYs82-87 are given in Annexes 6.1 to 6.5; relative assumptions are in Annex 6.6.The main features of the financial projections for the two sectors are givenbelow:
6.19 On the basis of available information and assumptions outlined inAnnex 6.6, meeting the financial targets set out in para. 6.13 would requireperiodic tariff increases. For the power sector, 11% increase on February 1,1982, 8% effective July 1, 1982 and others as discussed in para. 6.17 havebeen assumed. For I:he water sector, 10% increase on January 1, 1983, has beenassumed. The Government has agreed (see para. 6.13).
6.20 It was agreed during negotiations that the Government would onlendthe IDA credit to E])M at 9.6% interest for a period of 20 years including fiveyears' grace. However, as the financial condition of EDM permits, the 9.6%rate shall be reviewqed annually by the Government and IDA with a view to itsprogressive modification to conform to the then generally applicable relendingrate for proceeds o" IDA's credits. It was agreed that the foreign exchangerisk would be borne by EDM. It has been assumed future external assistancewould bear an average interest rate of 7% p.a. and have an average repaymentperiod of 15 years. On the basis of these assumptions the proposed tariffincreases would permit EDM to cover its debt service from FY82 onward.
6.21 In order to be assured that debt service will not be excessive,and that availability of both local and foreign costs will be assured, theGovernment and EDM agreed during negotiations: (i) to exchange views withthe Association on the costs and benefits and on the economic justification
- 43 -
of the investment before incurring any debt in excess of US$1 million foreach operation on behalf of the power or the urban water sectors; and (ii) tosubmit to IDA annually by March 31 of each year, a program detailing allinvestments planned in the power and the water sectors, and correspondingsources of both local and foreign funds, for the next three years.
VII. SUMMARY OF PROPOSED AGREEMENTS ANI) COVENANTS
Assurances and covenants
7.01 Agreement was reached with the Government and with EDM duringnegotiations, upon the following matters:
A. Conditions of Credit Effectiveness
(i) EDM will recruit a project coordinator on terms of referencealready agreed with the Association (para. 4.13);
(ii) EDM will sign a contract for the provision of a team of expertsto assist EDM's management on terms and conditions acceptable toIDA (para. 4.03);
(iii) IDA will be notified by FAC, CCCE and OPEC Fund that all conditionsprecedent to the disbursement of their respective grants or loans(except for the effectiveness of the proposed IDA Credit) havebeen fulfilled (para. 6.17);
B. Other Conditions
(iv) EDM will implement a complete cost accouniting system to allowseparated financial management and accounts of the power and thewater sectors by January 1, 1984 (para. 3.26);
(v) Starting with its accounts for FY83, EDM will have its annualaccounts audited by an independent auditor under terms and condi-tions satisfactory to IDA, and reports will be made available to IDAwithin four months of the end of each fiscal year. For FY1982EDM will provide: (a) a brief joint report on EDM's account by EDMand the accounting consulting firm hired under the project; and(b) an external audit of the Project relaited expenditure (para. 3.28);
(vi) EDM will submit to IDA, by March 31, 1984, for IDA's approval, aproposal to adjust its insurance contracts (para. 3.29);
(vii) The Government will carry out studies to determine the merits of:
(a) combining EDM and OERHN in a single power utility;
(b) separation of power and water utilities; and
(c) concession system (para. 4.16).
- 44 -
(viii) The Government will set at a planning office and prepare mediumand long term plans for the optimal development of the electricalsector in Mali, including a rural electrification plan (para. 4.16);
(ix) EDM will engage consultants to design the physical components ofthe Project, to prepare tender documents, and to supervise construc-tion (para. 4.17);
(x) Monitoring criteria and reporting requirements were agreed,and EDM will submit reports to the Association on a quarterlybasis (para. 4.19);
(xi) By December 31, 1982, the Government will furnish to EDM appropriatevalues for all public assets operated in the water sector by EDM(para. 6.03);
(xii) EDM will revalue assets in operation in the power and in the watersectors (including the assets to be conceded to EDM by Government),on a pro forma basis, using a methodology satisfactory to IDA, byDecember 31, 1983 (para. 6.07);
(xiii) the Government will: (a) continue its recently introduced policyof paying electricity/water bills on time; (b) continue to supportdisconnection policy for all consumers; (c) ensure that budgets forFY82 and subsequent years will contain sufficient funds for paymentof power and water supply by all Government agencies; (d) set-upappropriate arrangements by September 30, 1982 for municipalitiesand state enterprises to pay their bills promptly; and (e) takeappropriate action to reduce the arrears of the state enterprisesand the municipalities to no more than 2 months of billing byDecember 31, 1982 and June 30, 1983 respectively (para. 6.08);
(xiv) EDM will: (a) implement a commercial improvement program satisfac-tory to IDA; (b) reduce total consumer arrears to 3 months ofbilling by year-end 1982, and to no more than 2 months of billingby year-end 1983 onwards (para. 6.08);
(xv) A power tariff study and a water tariff study taking into accountmarginal cost of supply and financial requirements will be completedbefore December 31, 1983 (para. 6.12);
(xvi) EDM would take appropriate managerial and tariff actions so that itsconsolidated net cash generation for the two sectors calculated asthe difference between consolidated revenues and (a) consolidatedcash operating expenses, (b) consolidated debt service and (c)consolidated working capital requirements be at least equal to 10%in 1984 and each year thereafter of total capital expenditures forthe year. From FY84 onwards EDM would satisfy the same net cash
- 45 -
generation target, but for the power and water sectors individually.In order to achieve the above minimum targets, in addition to thealready implemented 11% increase in electricity tariffs effectiveFebruary 1, 1981, EDM will: (a) by July 1, 1982, increase elec-tricity tariffs by an additional 8%; (b) automatically adjusttariffs to cover any increases in the cost of purchased electricity;(c) automatically adjust tariffs to compensate for increases in thecost of operations due to inflation; and (d) by January 1, 1983,increase water tariffs by 10% (para. 6.13);
(xvii) The Government shall assume as of January 1, 1982 the services,as to both principal and interest, of all debt incurred prior tosuch date for the financing of power or water facilities in thepublic domain, as defined in the relevant concession agreements,until otherwise agreed by the Borrower and the Association on thebasis of the results of the exchanges of views on the tariff andconcession system studies included in the Project (para. 6.14);
(xviii) Government will on-lend proceeds of the Credit to EDM, at 9.6%interest rate, for a period of 20 years including 5 years grace.However, as the financial condition of EDM permits, the 9.6% interestrate will be reviewed annually by the Govesrnment and IDA with a viewto its progressive modification to confonn to the then generallyapplicable relending rate for IDA credits (para. 6.20);
(xix) EDM will assume the exchange rate risk (para. 6.20); and
(xx) The Government and EDM will: (a) exchange views with IDA on thecosts and benefits and economic justification, before incurring anydebt in excess of US$1 million for each operation on behalf of thepower or of the urban water sectors, and (b) submit to IDA annually,by March 31 of each year, a program detailing all investmentsplanned in the power and the water sectors, and correspondingsources of local and foreign funds, for the next three years(para. 6.21).
Recommendations
7.02 Subject to reaching agreement on the subjects listed in the paragraphabove, the proposed project is suitable for an IDA credit of US$24 million.The credit would be onlent to EDM at 9.6% interest, for a period of 20 yearsincluding 5 years- grace. The foreign exchange risk would be borne by EDM(para. 6.20).
- 46 - ANNEX 1.1
REPUBLIC OF MALI
ENERGIE DU MALI
First Power/Water Project
Documents and Data Available in the Project File
1. Etude de Rentabilite de l'Interconnection Bamako-Segou, Decembre 1979,EDF;
2. Plan Directeur du Reseau de Distribution de la Ville de Bamako,Fevrier 1980, EDF;
3. Plan Directeur d'Alimentation en Eau Potable de Bamako, Juin 1980,SAFEGE;
4. Report on Upgrading of the Bamako water treatment plant, by G. Wagner,June 1980;
5. Rapport Provisoire d'un Schema Directeur de la Formation Professionnelledes Personnels du Secteur de 1'Eau Potable, par G. Castegneau, Juillet,1980;
6. Statistiques Analytiques des Activites de l'Energie du Mali, Annees 1977et 1980;
7. Plan de Redressement de l'Energie du Mali, draft, Octobre 1980, EDF;
8. Arrete No. 531/MFC-CAB, 7 Fevrier 1980, abrogeant et remplacant l'arreteNo. 1357 du 30 Avril 1976 portant homologation des Tarifs de Consommationde l'Eau et de l'Electricite;
9. Centrale Mopti/Sevare, Avant-Projet, Aout 1980;
10. Ivory Coast First Power Project - Staff Appraisal Report: June 18, 1980Annex 10: "The Concession System in public utilities".
ENERGIE DU MALI
Bamako Electric System
Actual and Projected Generation, Peak Demand, System Capability and Energy Sales
Actual ProjectedYear ending December 31, 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987
/ Selingue's generation is referred to Bamako's substation.2/ Includes energy transmitted to Segou-Markala3/ Consists of 5.4MW at Sotuba, 15.5MW at Dar Salam, and 28.2MW of firm output at Selingue .
Note: Bamako's Electric System includes presently Koulikoro .From 1986 onward Segou-Markala and Fana will be linked to Bamako. >
x
ENERGIE DU MALI
Electric Systems in Provincial Centers (Exceptin Segou-Markala and Mopti-Sevare)
Actual and Projected Generation and Energy Sales
Actual Projected
Year ending December 31 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988
EnergY Lost, Unaccounted 16% 25% 13% 15% 15% 15% 15% 18% 18% 18% 18% 18% 18%for and Station Use,as % of Gross Generation
ORGRANIZATlON CUARl PO EDM
GENERAL MANAGER
DEPUTY GENERAL_
HANAGER
| COANIDIATOR |INSP,CTION|
SUPPLY | |TRAINING I |ADMINISTRATIVEl FINANCIAL | |WATER SUPPLY | POWER iPRODUCTION AND OPERATIONS OUTRIDE | BMAKO I D PLANNING I |ENGINEERINGI
| ~~ ~SERVICE | L!VC SERVICE S 1ERVICE| SERV ICE i DISTRIBUTION TRANSMISSION OP RAMARO SERVICEu OPERAT IONSJ| DEPARTMENTf DEPARTMENT|
TRAINING PRODUCTION DISTRIBUTION EN INEERING INTERCONNECTED PRODUCTION OUTSIDE
CENTER GRID OF BAMAKO WATER SUPPLY POWER CUSTOMERS
OPERATIONS DISTRIBUTION AND
FINANCES
DATA PROCESSING ACCOUNTING CUSTOMERS CASNMANAGEMENT
WATER SUPPLY POWER CUSTOMERS
OPERATIONS DISTRIBUTION ANDFINANCES
OPERATIONS METERCALIBRATION
WORYSRNOP
- 5s -
ANNEX 3.2
SUMMARY OF THE REHABILITATION PLAN FOR EDM
The decision to design a complete rehabilitation plan for EDM was takenin June 1980 following a common mission in Mali by IDA, CCCE, FAC and EDF. Thestudy was financed by CCCE and performed by EDF. A first draft was availablein October 1980 and further reviewed with EDM and cofinanciers. The MalianGovernment's agreement on a general outline for the study was given in June 1980and the Government has been kept informed ever since of the progress of the study,particularly by IDA's post-appraisal mission of December 1980.
The draft rehabilitation plan is available, in French, in the projectfile. A summary of its contents is given below:
1st volume
1- Environment of the study2- Introduction3- Objectives4- Method5- Means6- Schedule7- First phase8- Second phaseAnnex I: Terms of reference of the EDF studyAnnex II: Structure of actionAnnex III: Status of the experts and organization of their workAnnex IV: Detailed terms of reference for each of the proposed expertsAnnex V: Internal control of the objectives of the technical assistanceAnnex VI: Housing of the expertsAnnex VII: Training program for EDM's staffAnnex VIII: Follow-up of actions and performance measurement - detailed
reportingAnnex IX: Terms of reference for the assistance to the accounting serviceAnnex X: Terms of reference for the assistance to the maintenance of
technical facilitiesAnnex XI: Proposals for a better involvement of the Malian staffAnnex XII: Existing Malian students in French engineering schoolsAnnex XIII: Calculation of experts' salariesAnnex XIV: Complementary studies requested by EDM.
2nd volume
1- Detailed terms of reference for the rehabilitation of the Dar-Salamthermal plant
2- teims of fetr:nc ioo thk~e ntoxy of sevi-ce c co',update of customers' files and accounts, review of EDM's billingsystem and organization of a commercial department.
- 51 -ANNEX 4.1
ENERGIE DU MALI
First Power/Water Project
Breakdown of Technical Assistance Costs
1/US$ million CCCE/Total IDA FAC
1. Technical assistance personnel -- 52.5 man-year at: an 5.70 2.08 3.62aiverage of US$108,570 per man-year 2/
2. Studies and actions to be carried out:
<'a) updating of customers files and accounts, 2.94 2.94 -review of EDM's billing system, and organizationof a Customers Department, including follow-uppersonnel
(b) assistance to review and strengthen EDM's 0.29 0.29 -accounting services
(c) assistance in organizing a preventive maintenance 0.24 0.24 -system for both power and water supply
(d) assistance in building up a short/medium term 0.88 0.88 -planning capability for the power and watersectors and financing of a study on medium/longterm system planning to:(i) determine the optimum development of the
Bamako power system into an interconnectedgrid in southern Mali; and '
(ii) assess medium-term rural electrification needsand make proposals for a realistic rural elec-trification plan
(e) power and water tariff study 0.24 0.24 -(f) study on the merits of a single power entity 0.12 0.12 -
which would result from merging EDM with thepower activities of the Selingue Authority onceEDM is strenghened
(g) study on the advantages and disadvantages of the 0.06 0.06 -concession system in EDM's case
3. 'Physical facilities to house the Bamako operation and 1.47 1.47 -the data processing equipment, and extension of trainingcenter to house training in water supply
4. Construction of 10 housing units for technical assistance 1.28 - 1.28specialist
5. Overseas training for EDM's staff -- 36 man-months 0.08 0.08 -6. EDF's fee for supervision of technical assistance 0.29 0.29 -Total Base Line Cost (mid 1981 prices) 13.59 8.69 4.90Contingencies: physical 0.70 0.45 0.25
1/ Foreign exchange costs. EDM will provide local costs in kind 12/ Includes depreciation, maintenance and operation (including gasoline)
for a private vehicle supplied to each expert.
- 52 -
ANNEX 4.2
PROJECT MONITORING AND REPORTING REQUIREMENTS
Project and program reporting
1. Within 60 days of the end of each calendar quarter, a progress report isrequired which would provide detailed information and comments on projectexecution/procurement; existing and potential delays - and causes - comparativelyto original implementation schedules; actual and final project cost broken downbetween local and foreign cost by credit categories; disbursement schedule; and onany event affecting - or which could significantly affect - the project execution,with actions recommended to safeguard satisfactory progress of the project.
2. Within 60 days of the end of each calendar semester, a semi-annual progressreport is required which would provide information on the execution of all of EDMor DHE investment programs in the power or the water sector - programs which arenot part of the project itself - this report will mainly focus on constructionschedule and potential execution delays (and their causes) and on cost estimates.
Other technical matters
3. Within 60 days of the end of each calendar semester, a semi-annual progressreport will be established by EDM and sent to IDA which would include:
(i) power and water sales (GWh and m3) in Bamako and outstations;(ii) monthly peak power demand in Bamako;(iii) a summarized description of power and water operations during the past
semester outlining main problems encountered and solutions proposed.
Commercial reporting
4. Within 60 days of the end of each calendar semester, a semi-annual reporton progress achieved in the commercial field including:
(i) a statement of actual total sales by consumers category;(ii) number of consumers; and
(iii) a statement on receivables broken down between main categories of consumers.
Financial reporting
5. An annual financial report would be required within four months of the end ofeach fiscal year which would comprise:
(i) income statement and balance sheet, including annexes related to "publicdomain" assets;
(ii) fund flow statement showing the calculation of net cash generation andcapital expenditures in the public and private domains;
(iii) starting with report on fiscal year 82, a statement showing historical andrevalued values of assets in operation.
6. In addition, by September 30 of each year, a financial plan for the three sub-sequent years will be submitted to IDA. This plan will detail: (a) capital expendi-tures under consideration in the power and water sector, by EDM, and Government andother third parties and, (b) related sources of fund.
Extension of Bamako DistributionTabulation for Rate of Return Calculation
IncrementGWh in Sales Incremental Expenses Net Cash
Supplied Sales over 1984 Benefits Investment Generation 0 & N1 FlowYear to Grid GWh GWh US$million US$million US$million US$ million US$ million
Assumptions: 1. Useful life of distribution extension: 33 years ul2. Sales attributable to the project are the difference between sales in any given
year(up to year 1985)and sales in 1984 when the distribution extension is completed.From 1985 onward and up to 2016 sales attributable to the project are kept constantat the figure for 1985.
3. Sales of power have been computed by deducting from net energy supplied to thesystem 11% losses in the distribution system.
4. Benefits are computed at the current (1980) averagetariff.
5. Cost of energy up to year i185 is taken at the opportunity cost of energy suppliedfrom Selingue, which is zero. After 1985 the energy cost is taken at the long termmarginal cost of generation, which is the cost of energy produced by the extensionto the Sotuba hydroelectric plant. This cost is computed at US24.2 mills per kWh.
6 TncrPmPntl-.1 ePvnpnse for distribtiion are the variable expenses for maintenance- trans-
port and supplies adjusted to a level reflecting adequate maintenance.7. A conversion factor of 0.85 was used for all local costs and benefits.
Assumptions: 1. Useful life of power plant: 20 years2. Benefits are computed at the average tariff prevailing at the time of appraisal.3. Sales of power have been computed by deducting from gross generation the station's
own consumption 5% and technical losses in distribution 8%4. Cost of fuel is taken at zero for rice husk throughout the life of the plant and at
US$0.024 per kWh for gas oil (20% of total fuel used).5. Incremental 0 & M expenses are computed at US$15 per kW of installed capacity per year.6. A conversion factor of 0.85 was used for all local costs and benefits.
Water Supply Component
Tabulation for Rate of Return Calculation
Incremental Incremental Net
Water Sales Benefits Investment 0 & M Cash Flow
Year Thousand m3 US$ million US$ million US$ million US$ million
1982 0.64 (0.64)
1983 1.29 (1.29)
1984 1,314 0.26 0.02 0.24
1985/2013 1,314 0.26 0.02 0.24
Equalizing discount rate: 11%.
Note: ( ) means negative figure.
Assumptions: 1. Useful life of investment: 30 years.
2. Incremental water sales are computed at an average of 60 liter per day for 60,000 people. L
3. Benefits are computed at the current (1980) average tariff.
4. Incremental 0 & M expenses are calculated at US$0.02 million per year.
5. A conversion factor of 0.85 was used for all local costs and benefits.
LO
A C 0 E F G H I T K L H N
2 6 -9-ss I NCOME POWER
-f PM MIALI FT RST POWER-WATER PRO JECT - ENERG I E DIJ MRL I RNNEX 6.1
4 PNCOME STATEMENTS - POWER
5 (MILLION MALIAN FRANCS)
6
7 1979 ±s01e 192 s2 1998 iss4 1985 1986 1987
8 SALES OF ENERGY ----- ----- ----- ----- ----- __
9 ----- /----------
10 ENEROG SOLD GWH Sf 8 9'9 9 74 89. 4 98. 4 108S 2 119 1f0 9 144
11 FAVG P#ICE BEFORE TAR. INC. (FM/KWH) 5--: 68 76 69 69 69 69 69 69
12 SALE5 OF ENERGY BEFORE TAR.. INC 4456 6783 s624 6s178 6790 7466 8211 9032 9936
Total power sales, including low voltage sales and high voltage salesare unaudited actuals for FY80 and 1981; EDM estimate for 1982 and are projectedto grow at an average annual rate of 10% over the period FYs 83-87, as detailedin annexes 2.1, 2.2 and 6.1. Water sales grow over the period FYs, 80-87, asdetailed in annex 6.2. Tariff increases assumed are as forecast in the main report.IAS produces a constant average revenue of MF 1.85 for power and MF 18.5 for water.Rechargeable works and expenses transferred to capital account are projected as afunction of the growth of sales.
With regards to expenditures, cost to EDM for Energy from Selingue isMF 34 per kWh until June 30, 1981 and MF 40 thereafter. Fuel purchases arecomputed on the forecast for thermal generation (annex 2.1 and 2.2). Averageprice for Fuel is based on actual unit price throug'h 1981 and increased at theinflation rate of 10% per year in current terms. Unit fuel consumption for thermalgeneration is 280 g per kWh. Oil and miscellaneous are based on unaudited actualsthrough 1981. Chemicals are priced for FY 1980 at the average price of MF 23 percubic meter of water produced and are indexed on the inflation index. Personnelexpenses are assumed to grow at 10% per year. Miscellaneous taxes' grow with salesand inflation. External Services and supply gradually reach 4% of' total gross fixedassets. Expenses for Transport increase along with personnel expenses. RenewalsFund and Depreciation provisions for energy through 1984 are based, on forecastsof expenditures on each class of fixed assets using the following rates:
Public Domain (renewals)- Dams 1.9%- EDM financed assets 3.6%- Third parties fixed assets 3.8%
Following the review of concession system, it is assumed that starting1984 thecombined depreciation and renewal amount will decrease to about 7.5% of grossassets.
-62-ANNEX 6.6page 2 of 2
B. Cash Flow Statement and Balance Sheet
Customers receivables decrease to three months billing by FY 1983.Level of cash as shown in balance sheet in later years is large because EDM'sinvestment beyond the proposed project appears to be presently small andwill have to be defined and will therefore increase. The power and the watercomponents of the IDA Credit are on lent to EDM by the Government at 9.6%interest over a repayment period of 20 years including five years's grace. Othernew loans are assumed to bear 7% interest over a repayment period of 15 yearsincluding a one year grace period. All water sector assets in the publicdomain other than those financed by the IDA Credit are assumed to be financedby the Government. Capital expenditures are indicated in Annex 6.5.
240 it The de-edmntis used sod the -boucd-.r,es shwns this mapdo -to -oply, .o the part ef the .World Back andits affihates soy . MATI.
judgmet on the lega status cft. ,
REPUBLIC OF MALI I %N sr: n ' . A F R I CA
WATER/POWER PROJECT /
ENERGIE DU MALIl A TL A TIC
EXISTING PROJECT PROPOSED
PROJECT AREAS ',. SWAMP A /
20 ,/ DAMS RIVERS /2f
220 kV TRANSMISSION LINE | REGIONAL CAPITALS
150 kV TRANSMISSION LINES NATIONAL CAPITALS
* POWER PLANTS , REGIONAL BOUNDARIES
| -_ INTERNATIONAL BOUNDARIES
I ij JL. Faguibine -
0 D00 2DD 300 400 500 .Gao
KILOMETERS /
S E N E G A Li K-' / . ._ /
SENEGALt_ 3 < t < stoX5s z J t-\ X~ ~~~~~~~~~~~~~N I G E R
(o
G AIVANTA ) /
\z> s, , of S t _\.S<1 ll o i g g 41 l olSI2o~~~~~~~~~~~~~~~ ~ ~ ~ ~ ~ ~ ~ GERIA ~~~~~~~~~~~~~~~~~~~~~~~12nj
G E A ~~/ ~/ B E N I N
RY C ~ ~ ~ ~ GHN ;TOGO'> ( 4 Qj
20 MALI \\s
240 WATER / POWER PROJECT !A240LIURBAN WATER SUPPLY SITUATION 2 40
[__- Under EDM management A L G E R I A AriAEZZJ Under local government operation
. ,A System extension foreseen under next5 year period |
g = ~~~RiversiaFlooded reas j_*_ _
i* National capital j 40.
Internotional boundaries .
-200 .L 0
o 100 200 300 400 500 i
KILOMETERS |
This nap has been prepaned by the World Bank's staff efclusivelY for the convoeeneof the needers of the report to eioshi sin ottehed. The de.o-onlsons sced end thebosoden.s sheen on tbistrep do sot Ieply. on the p0nt of the World Bank and itsaffiliates, any jdgment on the legal status of any territory or any eodos..tnt or
cceptance of suh bonodetie
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