Scaling up Electricity Access in the Democratic Republic of the ...

Scaling up Electricity Access

in the Democratic Republic

of the Congo

Draft Final Report

January 2017

Submitted to World Bank by:

Economic Consulting Associates

Société Africaine de Développement

Rural

C:\Dropbox (ECA)\DRC electricity access sub-projects\FINAL SUBMISSION\ECA-SADER_DRC EASE

preparation_DFR.docx 10/01/2017

Economic Consulting Associates Limited

41 Lonsdale Road, London NW6 6RA, UK

tel: +44 20 7604 4546, fax: +44 20 7604 4547

www.eca-uk.com

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ECA Mid-Term Report - DRC Electricity Access Scale-Up

Executive summary

i

Executive summary

This document summarises the inputs the were provided by the consultant ECA-SADER to the World Bank for the preparation of the Project Appraisal Document (PAD) for the Electricity Access Service Expansion (EASE) project in the Democratic Republic of Congo.

This document focuses on:

The profile and evaluation of 4 private-sector electricity-access sub-projects, which constitute the short-term investment plan of EASE.

Recommendations on the development of a financing and technical assistance facility for the implementation of said short-term investment plan

An outline of a medium- to long-term access plan, focused on specific sub-projects which were evaluated as part of this assignment.

Description of proposed short-term investments

Four electricity access projects were retained by the World Bank and the Government of the DRC for financial and technical support in the short term. These four projects are presented in the table below.

Selected short-term projects under EASE

Project ref.

Project and developer Number of connections

Status / Progress Investment amount

Tshikapa

Tshikapa, KASAI Electricité du Congo (EDC) Construction of Lugundi 2 (first phase of 3.8 MW) Densification of existing grid based on available capacity in Lugundi 1 (0.6-0.7 MW excess capacity) Expansion on distribution network given additional capacity of Lugundi 2

11,500

Excess capacity in Lugundi 1, grid densification could start immediately. Construction of Lugundi 2 estimated to start early 2017 (operational July 2019) (first phase funded by AfDB).

$32.3m

Virunga

Rutshuru and surroundings, NORD KIVU Virunga SARL Construction of transmission and distribution grid associated to Matebe HPP (13.2 MW) and Lubero HPP (11.5 MW)

25,000

Power generation capacity already available at Matebe. Construction of transmission and distribution currently on-going. Lubero HPP fully funded. Distribution strategy being re-evaluated due to conflict with Energie du Nord Kivu (see below)

$21.1m for distribution grid (excludes $17.2m investment in Lubero HPP)


Executive summary

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Project ref.

Project and developer Number of connections

Status / Progress Investment amount

Beni-Butembo

Beni and Butembo, NORD KIVU Energie du Nord Kivu (ENK, PPP) Construction of HPPs Taliyia 1 (12.1 MW) and Ivugha (2.3 MW) Construction of transmission lines and distribution in Beni and Butembo

20,000

Construction of Ivugha estimated to start early 2017. Taliya to start later in mid-2017 (financed by DBSA)

$57.6m

Kananga

Kananga, KASAI CENTRAL EnerKac (PPP) Rehabilitation and extension of SNEL grid, construction of Tshibashi HPP (2.5 MW)

5,600

Pre-feasibility studies completed, power generation capacity already available (solar hybrid station). Construction of network estimated to start late 2016, HPP to start mid-2017.

$13.8m

The above investments in power generation, transmission and distribution infrastructure amount to $125 million ($142 million if including the investment in Lubero HPP, which is already fully funded). This will be funded by a mixture of long-term loans, equity, grants, and end-user contributions (through grid-connection fees).

In addition to these investments, end-consumers (households, businesses and institutions), who represent 62,000 electricity connections, are estimated to have to spend in $28 million for their internal electrical wiring and electric appliances. The total investment including this expenditure results in $170 million.

Proposed financing mechanisms

Based on the assessment of the four projects that constitute the short-term investment plan of EASE, the following are the main financial constraints found:

Insufficient capital to finance all infrastructure projects (power generation and distribution) in the pipeline. While a large part of the investment required is being financed by DFIs other than the WB (DBSA, AfDB), there remains a need for $31.1 million in long-term affordable finance (maturity of 10 years and above, interest rate below 7%) to implement the short-term projects described in section 2.

Local banks such as TMB and BCDC (which already work with Virunga and EDC respectively) are liquidity-constrained and incapable of providing said affordable long-term debt.

Low ability of end-users to pay upfront connection fees and to invest in internal wiring and electric appliances. This includes households, SMEs, and public service institutions (hospitals, clinics, public lighting).

Households and SMEs could potentially afford connection fees if these are financed over a few years. Current terms provided by concessionaires EDC and Virunga have only allowed for a slow uptake.


Executive summary

iii

Public service institutions (hospitals, clinics, public lighting) are assumed to require grants (non-reimbursable) to connect to the electricity grid.

In order to the above financial constraints, the following types and amounts of financial support from EASE are recommended:

Long-term loans to developers: $31.3m for completion of long-term financing requirements of power generation, transmission and distribution. This will allow for 33 MW of renewable energy and the connection of 62,000 customers to electricity grids.

Short-term loans to end-users: $36.1 million to facilitate the payment of connection fees to corresponding operators as well as invest in their own electrical wiring and appliances.

Grant for the connection of public service institutions (hospitals, clinics, public lighting): $10.6 million, which includes their payment of connection fees as well as grants to the operator to expand the distribution network into the areas where these priority institutions are located.

The total EASE financing of $78 million represents 46% of the total capital ($170.1m) that would be mobilised by the concessionaires, other DFIs, and end-users.

In addition to the mechanisms above, a credit enhancement support (guarantees) mechanism may be required to facilitate the implementation of the credit lines by local banks. A technical assistance component will also be required, in order to address sector barriers (such as policy and regulatory support for the government), project-specific barriers (to partially cover pre-development costs), and support the implementation of the programme (support to participating financial institutions and other stakeholders).

Project cost and financing (World Bank IDA funds)

Component Proposed mechanism Amount in short-term pipeline (USD million)

Generation and distribution concessionaire finance

Long-term concessionary loans 31.1

Customer finance Micro-loans to end-users 36.1

Grants for connection fees and electricity consumption

Grants 10.6

Credit enhancement support Loss risk-sharing support for PFIs 7.0

Technical assistance and project management

Technical assistance 5.0

89.9

Proposed institutional structure for implementation

In order to implement the above financial support mechanisms, a financial intermediary will be identified. The World Bank will allocate EASE funds through this intermediary, which will distribute funds among the participating financial institutions (commercial banks and


Executive summary

iv

others) according to the financing agreement between the World Bank and the government of DRC.

The financial intermediary will be responsible for signing financing agreements with participating banks and financial institutions, subject to the World Bank’s no objection. The following types of agreements are to be considered:

Financing agreement for long-term loans and subordinated debt for infrastructure projects

Financing agreement for short-/medium-term loans to end-users (residential and commercial) for payment of electricity connection fees and productive-use electrical equipment

Agreement for subsidies for the rehabilitation and connection of public service institutions (including subsidies for the extension of the electricity grid to supply these)

Agreement for Technical Assistance for training and capacity-building of the different stakeholders participating in the EASE project

The participating banks and financial institutions will be responsible for assessing the credit risk of their clients. Nevertheless, a guarantee mechanism to mitigate against this risk is to be put in place in order to facilitate and scale up loans to project developers and end-users of electricity.

Proposed technical assistance

Technical assistance is proposed at three levels:

TA to project developers: provided in order to facilitate the development of projects with high impact in electricity access. Examples of areas where TA support may be provided are provided are technical and engineering support (including feasibility studies, resource assessments, etc.), business and financial planning support, and legal and compliance support.

TA for EASE implementation support: this includes building capacity at the selected Financial Intermediary, provide training to PFIs involved in co-financing, including training on due diligence and M&E, and support to government institutions implicated in the implementation of the programme (MEHR, ANSER)

TA to government (both at national and provincial levels) in issues of policy, planning, and regulation which affect the implementation of the EASE project. This includes support to provincial governments in approving electricity projects within their boundaries, and support to build capacity at the newly created ANSER and ARE.


Executive summary

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Outline of a medium-to-long term access plan

There are initiatives in place to support institutional capacity building (and specifically medium- and long-term planning) in the energy access sector, at both the national level and at the provincial level. For example, the WB will provide support to conduct a geospatial

electrification planning study for DRC, and the African Development Bank is to support master plans for rolling out electrification at provincial level. For this reason, this section focuses on specific energy access projects which were evaluated during this assignment.

The table below presents the classification of projects that resulted from the mid-term mission to DRC according to their readiness for implementation.

Classification of projects according to readiness for implementation

SHORT TERM (0-3 years)

(Advanced stage of development)

MEDIUM TERM (3-5 yers)

(Priority projects, in need of technical assistance)

LONG TERM ( >5 years)

(To include in the pipeline of EASE)

1. Extension of distribution grid in Tshikapa (EDC)

2. Extension of distribution grid and construction of HPP Tshibashi for Kananga (ENERKAC)

3. Distribution grid linked to the Matebe HPP (VIRUNGA)

4. Distribution grid for Beni and Butembo (ENERGIE DU NORD KIVU)

5. Rehabilitation of the Lutshurukuru HPP for Kindu (NO SPONSOR*)

6. Hybrid solar PV power station and grid for Mbandaka (AES)

7. Rehabilitation of the Lubilanji I HPP, transmission to and distribution in Mbuji-Mayi (NO SPONSOR)

1. Rehabilitation of Bendera HPP for Kalemie (STS)

2. Rehabilitation of the Tshopo HPP (SNEL)

3. Electricité pour Kapanga II (ELKAP)

4. Rural electrification in the former Katanga province (by COOPERATIVES)

5. Rehabilitation of Mpiana Mwanga HPP (COMINIERES)

6. Construction of Kabinda HPP (NO SPONSOR)

7. Biomass and solar mini-grids in the Mai-Ndombe province (GHI INVESTMENT)

8. COMINGEM biomass power generation project (COMINGEM)

9. Rehabilitation of the Mobayi HPP and Nord-Equateur transmission and distribution network (NO SPONSOR)

10. Transmission and distribution from the Luvungi HPP (COCAT)

11. Rehabilitation of the Budana HPP (ELECTROKIMO)

12. Construction of Libongo Lokele HPP (NO SPONSOR)

1. Other HPP projects identified by the government

2. Other transmission and distribution projects identified by the government

3. Electrification of new provincial capitals (Buta, Isiro, Kenge, Mbandaka, Gemena, Lisala etc.)

* NO SPONSOR: projects was presented as a public initiative to be developed under a PPP, but no private sponsor has yet been identified


Executive summary

vi

Projects that were NOT retained as initial investments of the EASE project (i.e. excluding the first four projects in the first column) could benefit from support from the WB in order to be implemented in the medium to long term. Areas where these projects need support vary depending on the nature of the project, and include:

Financing of infrastructure: some of the more advanced projects (e.g. Rehabilitation of Bendera HPP for Kalemie (STS), which has already signed a concession agreement with the government) may benefit from access to affordable long-term finance similarly to the projects in the short-term pipeline of EASE.

Financing pre-feasibility and feasibility studies: assistance to carry out, among others, feasibility studies, resource assessments, hydrological studies, engineering design (generation side), engineering design (distribution side). Some developers face issues raising early-stage capital to fund studies, elaborate business plans, etc. Developer ENERKAC obtained this type of support from DFID-funded ELAN RDC, which was very useful in starting projects which are currently materialising.

Regulatory support and obtaining permits: complying with central government, provincial government and regulators’ requirements including accessing permits, licences, approvals and no-objections. This also include environmental and social compliance. Some developers mentioned difficulties in obtaining permits for generation, transmission and distribution. The recent decentralisation of administration (i.e. new provincial governments) adds more uncertainty. Projects affecting more than one province may also have additional difficulties.

Procurement in case of PPP projects or public projects tendered to privates: priority projects with no identified private sponsor (e.g. Rehabilitation of the Lutshurukuru HPP for Kindu, Rehabilitation of the Lubilanji I HPP, transmission to and distribution in Mbuji-Mayi) could benefit from financial and technical support with regards to procurement practices by MERH.


Contents

vii

Contents

1 Introduction 12

1.1 Objectives of this Draft Final Report 12

1.2 Contents of this report 13

2 Description of proposed short-term investments 14

2.1 Tshikapa 15

2.1.1 Description of developer 15

2.1.2 Description of project 16

2.1.3 Planned investments 16

2.1.4 Financial constraints 17

2.1.5 Possible forms of financial support 18

2.1.6 Impact assessment 19

2.1.7 Key risks 20

2.2 Virunga 21

2.2.1 Description of developer 21


2.2.3 Planned investments 22

2.2.4 Financial constraints 23



2.2.7 Key risks 26

2.3 Beni-Butembo 27

2.3.1 Description of developer (STS) 27


2.3.3 Planned investments and financing sources 28



2.3.6 Key risks 31

2.4 Kananga 31

2.4.1 Description of developer (EnerKaC) 31


2.4.3 Planned investments and financing sources 32


Contents

viii



2.4.6 Key risks 35

2.5 Summary of short-term investments 36

3 Proposed financing mechanisms 38

3.1 Analysis of financial constraints of project developers 38

3.2 Proposed financial support mechanisms 38

3.2.1 Generation and distribution concessionaire finance (long-term concessionary loans) 40

3.2.2 Customer finance (micro-loans to end-users) 40

3.2.3 Grants for connection fees and electricity consumption 41

3.2.4 Credit enhancement support 41

3.2.5 Technical assistance and project management 41

3.3 Project cost and financing 41

3.4 Proposed institutional structure for implementation 42

3.4.1 Role of MEHR 43

3.4.2 Role of ANSER 43

3.4.3 Role of Financial Intermediary 44

3.4.4 Role of Participating Financial Institutions 44

4 Proposed technical assistance 45

4.1 Technical assistance to project developers 45

4.2 Technical assistance to participating financial institutions 45

4.3 Technical assistance to government stakeholders 46

5 Outline of a medium-to-long term access plan 48

5.1 On-going initiatives towards electricity access plan 48

5.2 Specific energy-access projects to support in the medium and long term 49

Analysis of short-term projects 53

Virunga connection application and tariffs 55

Details of proposed financing mechanisms 57


Tables, figures and boxes

ix

Tables, figures and boxes

Tables

Table 1 Four selected short-term projects under EASE 14

Table 2 Tshikapa: Planned short-term investments 17

Table 3 Possible forms of financial support to EDC 18

Table 4 Tshikapa investments and financing 19

Table 5 Impacts of Tshikapa project 19

Table 6 Planned short-term investments Virunga SARL 22

Table 7 Possible forms of financial support to Virunga SARL 24

Table 8 Virunga investments and financing 25

Table 9 Impacts of Virunga project 25

Table 10 Planned short-term investments Energie du Nord Kivu 28

Table 11 ENK investments and financing 30

Table 12Impacts of Beni-Butembo project 30

Table 13 Planned short-term investments ENERKAC 33

Table 14 ENERKAC investments and financing 34

Table 15 Impacts of ENERKAC project 35

Table 16 Summary of short-term investments 37

Table 18 Possible forms of financial support of EASE 39

Table 19 Project cost and financing (World Bank IDA funds) 42

Table 20 Technical assistance to project developers 45

Table 21 On-going initiatives towards electricity access plan 48

Table 22 Classification of projects and ranking of short-term projects 50

Figures

Figure 1 Possible forms of financial support of EASE 40

Figure 2 Proposed institutional structure for implementation 43


Acronyms

x

Acronyms

AfDB African Development Bank

ANSER Agence Nationale des Services Energétiques Ruraux – National Agency for Rural Energy Services

ARE Agence de Régulation de l’Electricité – Electricity Regulation Agency

BCDC Banque Commerciale du Congo

BOT Build Operate Transfer

CAPEX Capital Expenditure

DBSA Development Bank of South Africa

DFID UK Department for International Development

DFR Draft Final Report

DRC Democratic Republic of Congo

EASE Electricity Access and Service Expansion (WB programme)

EDC Electricité du Congo

ENERKAC Energie du Kasai Central

ENK Energie du Nord Kivu

ESIA Environmental and Social Impact Assessment

HPP Hydropower plant

ICCN Institut Congolais pour la Conservation de la Nature

IDA International Development Agency

IPP Independent Power Producer

IRR Internal Rate of Return

KfW KfW Development Bank

LV Low Voltage

MERH Ministère de l’Energie et des Ressources Hydrauliques – Ministry of Energy and Water

MV Medium Voltage

MW Megawatt

PAD Project Appraisal Document

PPA Power-Purchase Agreement

PPP Public-private partnership

PV Photo-Voltaic

REGIDESO Régie de Distribution d’eau de la RDC – DRC water distribution utility

SE4All Sustainable Energy for All

SME Small and Medium Enterprise

SNEL Société Nationale d’Electricité – National Electricity Company

SOCODEE Société Commerciale de l’Eau de l’Electricité


Acronyms

xi

STS Société de Techniques Spéciales

TA Technical Assistance

TAF Technical Assistance Facility

UCM Unité de gestion du projet de développement des Centrales de taille Moyenne – Unit for project management of mid-sized HPPs

UNDP United Nations Development Programme

USAID US Agency for International Development

USD United States Dollars

WB World Bank


Introduction

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1 Introduction

This Draft Final Report is submitted by Economic Consulting Associates Ltd (ECA) of the United Kingdom, together with SADER of RDC, for the assignment:

Democratic Republic of Congo (RDC) – Development of an electricity access plan and short-term investments

The assignment is being undertaken for the World Bank (WB), to support the preparation of the Electricity Access and Service Expansion (EASE) project. The government of DRC, represented by the Ministère de l’Energie et Ressources Hydrauliques (MERH) and specific departments and agencies (ANSER, UCM, etc.) are the ultimate beneficiaries of this study and have been consulted for the preparation of all reports under this assignment.

This document was prepared on the basis of review of documentation related to selected short-term projects (e.g. feasibility studies), site visits to project sites, interviews with project developers, consultations with government stakeholders and donors, and review of electricity sector publications, interviews with local banks which could potentially participate in the EASE project, etc.

1.1 Objectives of this Draft Final Report

This document summarises the inputs the were provided to the World Bank for the preparation of the EASE project’s Project Appraisal Document (PAD), and the main outcomes of the pre-appraisal mission of the World Bank, held in Kinshasa between 24 October and 3 November 2016.

This report follows previous deliverables, which are not included in this submission, namely:

Inception report, which presented an overview of the existing framework for rural electrification, the relevant programmes of the government and international development agencies, and existing and planned projects.

Mid-term report, which presented a database of project developers and potential short-term sub-projects for EASE, as well as the proposed selection of four initial investments.

The objective of this Draft Final Report is to present:

The profile and evaluation of 4 short-term projects, which constitute the short-term investment plan of EASE.

Recommendations on the development of a financing and TA facility for the

implementation of the short-term investment plan, including types of financial mechanisms, TA and institutional structure.


Introduction

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An outline of a medium- to long-term access plan, focused on specific projects which were evaluated as part of this assignment.

1.2 Contents of this report

This DFR is structured as follows:

Section 2 presents each of the 4 short-term sub-projects selected as the short-term investment plan of EASE, namely Tshikapa (2.1), Virunga (2.2), Beni-Butembo (2.3), and Kananga (2.4).

Section 3 presents recommendations on financing mechanisms to support the implementation of the short-term investment plan based on the analysis of financial requirements of the sub-projects.

Section 4 provides Technical Assistance requirements for the implementation od EASE, including TA for the development of specific subprojects, TA for the implementation of EASE, and TA for relevant government institutions.

Finally, section 5 provides a rough outline of a medium-to-long term access

plan. This plan is solely based on the database of sub-projects that was analysed as part of this project, rather than providing a more general strategy for the DRC government.

This DFR also contains annexes submitted as separate files:

Annex A1 includes, for each of the selected short-term sub-projects of EASE, (i) investment memos (providing additional detail than what is summarised in this report) and (ii) an MS Excel file containing details of the project developers, characteristics of the projects, financing structure, and financial analysis.



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2 Description of proposed short-term investments

Following the mid-term workshop in Kinshasa and associated report, four electricity access projects were retained as eligible for the World Bank and the Government of the DRC to support in the short term (i.e. disbursements within 2 years, completion within 3). These four projects are presented in Table 1.

Table 1 Four selected short-term projects under EASE

Project ref.

Project and developer Number of connections and CAPEX

Status / Progress Comments and concerns

Tshikapa

Tshikapa, KASAI Electricité du Congo (EDC) Construction of Lugundi 2 (first phase of 3.8 MW) Densification of existing grid based on available capacity in Lugundi 1 (0.6-0.7 MW excess capacity) Expansion on distribution network given additional capacity of Lugundi 2

11,500 connections, $32.3m

Excess capacity in Lugundi 1, grid densification could start immediately. Construction of Lugundi 2 estimated to start early 2017 (operational July 2019).

Need to coordinate actions with AfDB regarding financing of Lugundi 2. Lugundi 2 to supply REGIDESO (1.5 MW).

Virunga

Rutshuru and surroundings, NORD KIVU Virunga SARL Construction of transmission and distribution grid associated to Matebe HPP (13.2 MW) and Lubero HPP (11.5 MW)

25,000 connections, $21.1 million for distribution grid (excludes $17.2m investment in Lubero HPP)

Power generation capacity already available at Matebe. Construction of transmission and distribution currently on-going. Lubero HPP fully funded. Distribution strategy being re-evaluated.

Need to provide institutional support to accelerate the rate of connections. Need to coordinate with several public and private institutions, national and international

Beni-Butembo

Beni and Butembo, NORD KIVU Energie du Nord Kivu (ENK, PPP) Construction of HPPs Taliyia 1 (12.1 MW) and Ivugha (2.3 MW) Construction of transmission lines and distribution in Beni and Butembo

20,000 connections, $57.6m

Construction of Ivugha estimated to start early 2017. Taliya to start later in mid-2017. Feasibility studies and concession available.

Financing agreement with DBSA for Taliya HPP, transmission and distribution.

Kananga

Kananga, KASAI CENTRAL EnerKac (PPP) Rehabilitation and extension of SNEL grid, construction of Tshibashi HPP (2.5 MW)

5,600 connections supplied by existing capacity and Tshibashi HPP, $13.8m

Pre-feasibility studies completed, power generation capacity already available (solar hybrid station). Construction of network estimated to start late 2016, HPP to start mid-2017.

Project with a high involvement of public sector (Province, SNEL, REGIDESO).

Will need revision of current tariff structure.

Tshibashi HPP not as cost-effective as other alternatives.



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As part of this preparation study, these four projects and associated developers were evaluated in detail for the WB EASE programme’s short-term investment plan. For this purpose, the team of consultants interviewed developers, evaluated project documentation (feasibility studies, concession agreements, tariff structures, etc.), and conducted site visits to project locations1 to obtain the information needed to:

Determine investment requirements and construct financial models for each project

Determine financing needs and constraints

Recommend financing mechanisms for EASE to support in overcoming said constraints

The following sub-sections contain the results of this analysis for each of the retained projects, in summarised form. Annex A1 contains more detailed descriptions of the projects, as well as extracts from the financial models produced for each.

2.1 Tshikapa

2.1.1 Description of developer

Electricité du Congo (EDC), a private firm, was established in 2004 as a pilot in the privatisation of the electricity sector in DRC. EDC holds a 25-year concession for the operation of the only hydro-power plant supplying the city of Tshikapa, the Lugundi HPP, originally constructed in 1947, and which was then in poor condition.

EDC invested in the rehabilitation of the HPP, the transmission lines and reconstruction of the distribution network. EDC functions as a vertically-integrated utility (from power generation to retail) for Tshikapa, providing electricity 24 hours/day to about 3,000 customers.

EDC is owned and managed by the directors and owners of Société de Techniques Spéciales (STS), a private firm specialised in the electricity sector in DRC with over 20 years of existence. STS is an engineering firm conducting technical studies, implementing electricity generation, transmission and distribution projects, as well as industrial automation. In addition, STS is building on their experience with EDC to invest in similar electricity concessions in DRC:

Energie du Nord Kivu – established as a partnership between STS and the government of Nord-Kivu (95% and 5% ownership respectively) to construct and operate hydropower plants to supply the cities of Beni and Butembo. Total investment in the order of $57.6m (see section 2.3)

Rehabilitation Bendera HPP and supply to Kalemie – STS recently won a public tender for the 25-year BOT concession of the rehabilitation and operation of the

1 Three project sites were visited: Tshikapa, Rutshuru, and Taliya 1. ENERKAC was not available to host a site visit to the Kananga project site.



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43 MW HPP and the electricity supply to the city of Kalemie in the Tanganyika province. The total investment is estimated at $75m.

2.1.2 Description of project

Tshikapa is the capital city of the Kasai province. As mentioned in the previous section, EDC holds a concession to operate the Lungudi HPP (1.5 MW), situated 30km from Tshikapa. EDC currently supplies electricity to about 3,000 customers in Tshikapa, which represents only 4% of the population.

EDC is planning the construction of a new HPP (Lungudi II, 7.6 MW) and corresponding transmission and distribution infrastructure. The project will be conducted in two phases, with the first phase being dedicated to supply electricity to the water utility REGIDESO.

The short-term investments in Tshikapa relevant to the EASE programme can be broken down as follows:

Construction of Lungudi 2 HPP (Phase 1) – capacity of 3.8 MW to supply REGIDESO (demand of 1.5 MW), the excess being available to supply Tshikapa. This first phase also includes the investment in civil works sized to allow for the addition of an additional 3.8 MW turbine to bring the total capacity to 7.6 MW (phase 2). The total investment for phase 1 has been estimated $20.4 million and the HPP is expected to be operational in 2019.

Construction of MV transmission from Lungudi 2 to Tshikapa – 22 km of 33 kV lines and 6000 kVA of MV/LV transformer capacity. Investment estimated at $2.6 million.

Densification of the distribution grid in Tshikapa given existing capacity – Lugundi 1 has available capacity allowing for the connection of approx. 1,500 additional customers to the existing grid (5 km MV, 15 km LV)

Expansion of the distribution grid in Tshikapa given additional capacity – given excess capacity (after supply to REGIDESO) from the first phase of Lugundi 2, and additional 10,000 customers could be connected to the Tshikapa grid, which requires expansion of the network (>5 transformers, 15 km MV, 100 km LV).

2.1.3 Planned investments

As mentioned above, EDC’s short-term investments include the construction of Lungudi 2 HPP (first phase of 3.8 MW), corresponding transmission infrastructure, densification of their existing distribution network, and extension of the distribution network to reach areas currently not covered. Investment requirements for the projects mentioned in the above section are summarised in Table 2. Annex A1.1 contains a more thorough assessment of the hydro power plant and distribution network investments in Tshikapa.



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Table 2 Tshikapa: Planned short-term investments

Project Status Amount (USD ‘000)

Source of capital

Completion date

Other comments

Construction of Lungudi 2 HPP Phase 1 (3.8 MW)

Feasibility studies complete

20,386 AfDB loan (for REGIDESO investment), other long-term loan, equity, end-users (connection fees), grants

2019 Additional cost of civil works to allow for subsequent expansion to 7.6MW ($6.8m) not included in AfDB loan

Construction of MV transmission from Lungudi 2 to Tshikapa


2,571 2019 22 km of 33 kV lines and 6000 kVA of MV/LV transformer capacity

Densification of the distribution grid in Tshikapa

On-going 1,899 2017 1,500 connections

Expansion of the distribution grid in Tshikapa


7,422 2019 10,000 connections

32,278

The above investment amount for EDC, adding up to $32.3 million, excludes investments from end-consumers relating to their electricity connections and internal wiring, estimated at $4.0 million, which are also relevant for the EASE programme.

2.1.4 Financial constraints

Financial constraints to complete the short-term investment plan include:

CAPEX financing to complete construction of Lungudi 2 HPP Phase 1 (with civil works allowing for subsequent expansion in phase 2) as well as distribution infrastructure.

The loan from AfDB linked to the supply to REGIDESO only covers the investment associated to a capacity of 3.8MW (excluding the increased cost of civil works for a subsequent expansion) and excludes the investment in distribution infrastructure.

EDC’s local bank (BCDC) is liquidity-constrained and unable to provide long-term loans at competitive rates for the remainder of the financing requirements.

Low ability of end-users to pay upfront connection fees (to EDC) and other internal costs (wiring, electrical appliances). This includes both households as well as public service institutions (hospitals, clinics, public lighting).



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2.1.5 Possible forms of financial support

In order to overcome the financial constraints presented above, the EASE programme could support EDC through the following mechanisms:

Table 3 Possible forms of financial support to EDC

Financial constraint

Proposed mechanism

Beneficiary Details Amount Other comments

CAPEX financing to complete infrastructure projects

Long-term concessionary loans

EDC Long-term loans (5-20 years) at concessionary rates for electricity generation and distribution projects.

$9.0m for completion of Lungudi 2 anddistribution

Possible to channel through EDC's current bank.

High connection costs, ability to pay upfront connection fees

Micro-loans to end-users

End-users (households and SMEs)

Micro-loans (max $1,000), short term (max 2 years) to finance connection fees and productive electric appliances for SMEs.

$6.6m for 11,500 connections

Ability to pay of public service institutions (hospitals, clinics, public lighting)

Grants for connection fees of public service institutions

Public service institutions (hospitals, clinics, public lighting)

Grants for connection and functioning of public institutions

$1.7m

$17.3m

In summary, the proposed financing structure is shown in Table 4. The total contribution from the EASE programme to the Tshikapa project would be of $17.3 million, broken down as follows:

Long-term loans to EDC: $9.0m for completion of Lungudi 2, and distribution network densification and expansion to connect 11,500 customers.

Short-term loans to end-users: $6.6m for 11,500 customers to finance their connection fees (paid to EDC) as well as other costs of internal wiring and electrical appliances.

Grant for the connection of public service institutions (hospitals, clinics, public lighting): $1.7 million.



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Table 4 Tshikapa investments and financing

A financial analysis has been conducted for the combined investment portfolio of Lugundi 2 HPP and the distribution network in Tshikapa (see annex A1.1). This analysis shows an IRR of 21.4%. This however assumes that all of the output of the power plants is sold, which requires selling electricity to large consumers in addition to selling electricity to households.

2.1.6 Impact assessment

Main impacts of the project are summarised in Table 5.

Table 5 Impacts of Tshikapa project

Impact Description Comments

Electricity access Number of connections: 11,500 (13 Amp) (1,500 associated to existing capacity and 10,000 associated to Lungudi 2)

Connection of hospitals and schools for free.

Public lighting provided.

By providing electricity to 11,500 additional customers, the project has an important social and economic impact. However, connectivity remains low at 18% of the population in the urban area served by EDC.

Electrification of provincial capital and of REGIDESO

Project will provide electricity in the capital of Kasai (electrification of provincial capitals is a government priority) and to the water utility REGIDESO.



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Electricity pricing The electricity price proposed for LV (0.40 $/kWh) seems high in comparison to the cost of supply (0.31 $/kWh). In addition, considering current connection fees ($760) which pay for distribution infrastructure, the price of electricity should not exceed 0.21 $/kWh.

The electricity tariff for MV (0.14 $/kWh) corresponds approximately to the actual cost of power generation (0.07 $kWh and MV transmission (0.07 $/kWh).

The main reason for the high price of electricity is that costs are being borne by a small number of customers. It is the partly responsibility of the developer to increase the number of consumers, and partly for the government to provide possibilities for interconnection, so that prices can be reduced.

Environmental impact

Reduction of consumption in kerosene and disposable batteries. Reduction in consumption of biomass (minor).

Negative environmental impacts of HPP and electricity infrastructure assumed under control and supervised by the corresponding public authority under an Environmental and Social Management Plan.

ESIA of the project has been completed.

2.1.7 Key risks

Some of the risks that are specific to this project are mentioned below. Additional information can be found in annex A1.1.

Electricity demand – the financial viability of the project relies on the assumption that all of the HPP’s output is sold. The 10,000 households assumed to be supplied by Lugundi 2 are expected to consume less than half of the output. The remainder (especially off-peak) should be sold to large consumers, such as REGIDESO and industrial customers, or through the interconnection to the SNEL network and export of electricity.

Payment for electricity by REGIDESO – it is of concern whether REGIDESO will consistently pay the full electricity tariff for the 1.5 MW of demand allocated to them. To reduce this risk, EDC is currently negotiating for the financing of Lugundi 2 from AfDB to serve as pre-financing for the supply of electricity. This way, the loan is repaid through a preferential tariff to REGIDESO.



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2.2 Virunga

2.2.1 Description of developer

Virunga SARL is a subsidiary of the Virunga Foundation (a UK charity co-managing2 the Virunga National Park with the Institut Congolais pour la Conservation de la Nature (ICCN), the DRC’s national parks’ authority). Virunga SARL develops, owns and operates lodges and tented camps within the park, as well as hydro-electric projects (two HPP completed, another six in the pipeline for a total of 96 MW by 2022).

The Hydro-Power Division of Virunga SARL is implementing the energy investment program, funded by a combination of shareholders and long-term loans from DFI’s such as BIO (Belgian Investment Company), the European Investment Bank, the Howard G. Buffet Foundation, and the CDC group. The $161 million energy programme to 2022 is currently funded to approx. $40 million.


Within the pipeline of projects of Virunga SARL, the following short-term components are of relevance for the WB’s EASE programme:

1. Densification and extension of electricity grid associated to the Matebe HPP. The Matebe HPP (13.2 MW, $17.2m investment, loan from HGBF) was completed in December 2015 and is currently operating at 1-4% of its capacity due to limited demand. Grid extension and densification include:

a. End-user connections – potential for about 15,000 connections (3 Amp). Up to August 2016, 265 households had been connected. Virunga’s short-term objective is of 4,000 connections by March 2017. One of the main barriers to accelerate connections are the burdensome procedures and bureaucratic requirements (need for land ownership certificate, independent electricians to conduct inspections and internal wiring, etc. (grid connection procedures described in annex A2))

b. Grid extension to Goma – a MV line from Rutshuru–Rugari (33kV, 30km) has already been completed. The remaining Rugari-Munigi section (33kV, 30km) and interconnection in Goma will be financed by SOCODEE3 (a private

2 The Co-management Agreement between Virunga Foundation and ICCN (effectively a development concession) extends to year 2040 and includes the development of energy infrastructure via VIRUNGA SARL. All material, equipment and installations financed by VIRUNGA SARL and the associated liabilities, remain the exclusive property of VIRUNGA SARL for the duration of the Agreement. 3 SOCODEE (Société Commerciale de l’Eau de l’Electricité), a JV of commercial businesses of Goma (including Ihusi Hotel and the Nyiragongo cement factory), have already pre-financed the extension of MV line to Munigi, which is at the border between Goma and the distribution concession perimeter of Virunga SARL. This agreement is to provide 5 MW to the businesses, which will then build their own distribution network in Goma next to the one of SNEL.



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industrial group), which will be the off-taker. Completion expected in December 2016.

2. Construction of distribution network associated to Lubero HPP. The Lubero HPP (11.5 MW, $17m investment from EU and CDC) is currently under construction and expected to be operational in December 2018. The distribution network is currently under re-evaluation, as it originally targeted the supply to Beni and Butembo, for which an electricity distribution concession has been granted to consortium Energie du Nord Kivu (95% private firm STS of DRC and 5% government of the Nord-Kivu province).

3. Expansion of the Mutwanga power generation and distribution system. Virunga SARL’s first HPP project (Mutwanga 1, 0.4 MW, $2.8m investment, EU grant, completed in August 2013) produces power well below specification due to insufficient water flow resulting from poorly planned hydrological surveys. A plan to upgrade power supply in Mutwanga includes (i) increasing head of Mutwanga 1 (feasibility studies needed), (ii) construction of Mutwanga 2 (1.5 MW, $4m, operational in 2019, and (iii) extension of distribution network in Mutwanga. Power off-takers include soap factory SICOVIR (650 kVA, currently running diesel generators). Studies relating to these options are currently under way at pre-feasibility level.

Of the above projects, the investments to increase connectivity associated to Matebe HPP (1a) and the construction of a distribution network associated to Lubero HPP (2) are analysed in further detail in the following sections.

2.2.3 Planned investments

Investment requirements for the projects mentioned in the above section are summarised in Table 6. Annex A1.2 contains a more thorough assessment of the hydro power plant and distribution network investments of Virunga.

Table 6 Planned short-term investments Virunga SARL


Source of capital

Completion date

Other comments

Densification and extension of electricity grid associated to the Matebe HPP

Ongoing 11,849 Virunga SARL, long-term loan, end-users (connection fees), grants

4,000 end-user connections by Mar-2017, potential for 15,000 connections

Barriers to achieve connection targets include end-user’s ability to pay connection fees and burdensome administrative procedures.



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Source of capital

Completion date

Other comments

Construction of distribution network associated to Lubero HPP

Under evaluation

9,224 (estimate)

Virunga SARL, long-term loan, end-users (connection fees), grants

TBD Need to re-assess sales strategy as Beni and Butembo have been belong to an electricity distributionconcession of another company

21,074

The above investment amount for Virunga, adding up to $21.1 million, excludes the financing requirements of $17.2 million associated to the construction of the Lubero HPP, which have already been secured.

The above amount also excludes investments from end-consumers relating to their electricity connections and internal wiring, estimated at $16.9 million, which are also relevant for the EASE programme.

2.2.4 Financial constraints

Financial constraints to complete the short-term investment plan include:

CAPEX financing to complete Lubero and Mutwanga projects. While financing for the Lubero HPP has already been committed (EU, CDC), sources of financing for the Lubero grid and to expand Mutwanga have not yet been identified.

Local bank TMB (Virunga SARL's current bank) is constrained in terms of liquidity and cannot provide affordable long-term loans which are required.

High end-user connection costs (up to $700 including hardware as well as the necessary paperwork). This is aggravated by burdensome administrative procedures. Annex A2 provides additional details on the non-financial constraints to accelerating connections.

Low ability of end-users to pay upfront connection fees. This includes both households as well as public service institutions (hospitals, clinics, public lighting)


In order to overcome the financial constraints presented above, the EASE programme could support Virunga SARL through the mechanisms:



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Table 7 Possible forms of financial support to Virunga SARL


Proposed mechanism

Beneficiary Details Amount Other comments



Virunga SARL

Long-term loans (5-20 years) at concessionary rates for electricity generation and distribution projects.

$13.4m for completion of Rutshuru and Lubero distribution

Possible to channel through Virunga SARL's current bank (TMB)

Possibly not critical given Virunga SARL’s proven ability to attract grants and concessionary loans.





$13.9m for 25,000 connections

Repayment through electricity bill. Possible to implement through Virunga SARL's current financial institutions (MECRECO and TMB)

Need for accompanying support in overcoming administrative barriers to connect end-users.


Grants for connection fees of public service institutions



$1.1m Possible to channel through Virunga Foundation for management and transparency.

$28.5m

In summary, the proposed financing structure is shown in Table 8. The total contribution from the EASE programme to the Virunga project would be of $28.5 million, broken down as follows:

Long-term loans to Virunga SARL: $13.4m for completion of Rutshuru (15,000 connections) and Lubero (10,000 connections) distribution networks

Short-term loans to end-users: $13.9m for 25,000 customers to finance their connection fees paid to Virunga as well as other costs of internal wiring and electrical appliances.




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Table 8 Virunga investments and financing

A financial analysis has been conducted for the combined investment portfolio of Lubero HPP and the distribution networks associated to Matebe and Lubero (see annex A1.2). This analysis shows an IRR of 15.7%. This assumes that all of the output of the power plants is sold, which requires selling electricity to large consumers (similarly to SOCODEE in the case of Matebe HPP) in addition to selling electricity to households.



Table 9 Impacts of Virunga project


Electricity access Number of connections: 25,000 (3 Amp), total associated to both HPPs (Rutshuru and Lubero)

Connection and free electricity supply to all schools and hospitals.

By providing electricity to 25,000 customers, the project has an important social and economic impact.

Electrification of provincial capital

The HPPs will be interconnected with Goma, capital of the province of Nord-Kivu. SOCODEE (a private industrial group) will be the off-taker.

Offering electricity from hydropower to industry in Goma allows for a positive impact in the economic development of the area.



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Electricity pricing The electricity price proposed for LV (0.18 $/kWh) is higher than the average cost of supply (0.14 $/kWh) but lower than the economic cost (0.26 $/kWh)


Reduction of consumption in kerosene and disposable batteries. Reduction in consumption of biomass. Virunga is promoting the use of efficient electric stoves (10,000 units have already been distributed free of charge) to reduce deforestation in the national park.


2.2.7 Key risks


Electricity demand - the financial viability of the project (IRR 15.7%) relies on the strong assumption that all of the HPP’s output is sold. The 25,000 households assumed to be supplied by the Matebe and Lubero HPPs are expected to consume less than half of the output. The remainder (especially off-peak) should be sold to large consumers, or through the interconnection to the SNEL network and export of electricity. The interconnection with Goma and electricity sales to SOCODEE (5 MW) allows for the reduction of risk. A similar solution will be needed for the Lubero scheme.

Regulatory risk and distribution strategy associated to Lubero HPP – while Lubero counts with an electricity generation and distribution licence, the latter is not exclusive. Lubero HPP was to supply Beni and Butembo, for which an electricity distribution concession has been granted to consortium Energie du Nord Kivu. For this reason, Virunga needs to find alternative off-takers for the HPPs output.

Competition with other electricity suppliers – the Matebe HPP scheme is also in competition with NGO Caritas, which owns a 600 kW HPP and distributes and sells electricity in Rutshuru, Kiwanja and Rubare.

Achieving number of connections – in addition to the upfront cost of electricity connections that consumers need to pay to Virunga, there are other financial and



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non-financial barriers for customers to connection to the grid (see annex A2 - certificate of parcel property, assessment of independent electrician, final validation, etc.). Financing costs of end-customers through proposed micro-loan scheme will help mitigate against this risk. Additional support into streamlining connection procedures would also be beneficial in accelerating the rollout.

Management of retail business – while Virunga has proven its capacity to develop, finance and construct hydro-power projects, its capacity with regards to the distribution and retail (utility) business is yet to be demonstrated. Capacity-strengthening in this area (management and regulatory aspects) is desirable.

2.3 Beni-Butembo

2.3.1 Description of developer (STS)

Société de Techniques Spéciales (STS) is a private firm specialised in the electricity sector in DRC with over 20 years of existence. STS is an engineering firm conducting technical studies, implementing electricity generation, transmission and distribution projects, as well as industrial automation. In addition, STS owns Electricité du Congo (EDC) (see section 2.1) and can therefore build on their experience as a vertically-integrated electric utility in Tshikapa.

STS is investing in similar electricity concessions as that of Tshikapa in DRC:

Energie du Nord Kivu (the project considered in this section) – established as a partnership between STS and the government of Nord-Kivu (95% and 5% ownership respectively) to construct and operate hydropower plants to supply the cities of Beni and Butembo. Total investment in the order of $57.6m.

Rehabilitation Bendera HPP and supply to Kalemie – STS recently won a public tender for the 25-year BOT concession of the rehabilitation and operation of the 43 MW HPP and the electricity supply to the city of Kalemie in the Tanganyika province. The total investment is estimated at $75m.


STS is currently investing in an electrification projects which consists of two hydro power plants (Ivugha and Taliya-Nord 1; total capcity of 14.5 MW) and the provision of electricity to the cities of Beni (pop. 400,000) and Butembo (pop. 1,000,000). The project consists in the financing, construction and management of this power generation, transmission and distribution infrastructure.

For this purpose, STS has created a public-private partnership with the provincial government of Nord Kivu, creating the company Energie du Nord Kivu (95% owned by STS and 5% by the Nord Kivu province).

The breakdown of the short-term investments associated to Energie du Nord Kivu are as follows:



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Construction of Taliya 1 HPP (12.1 MW) – investment of $19.4 million, completion expected in 2018.

Construction of Ivugha HPP (2.4 MW) – investment of $4.5 million, completion expected in March 2017.

Transmission to lines Beni and Butembo – investment of $11.2m. A first phase will include transmission from Ivugha to Butembo (8km, $0.8m), while a second phase will cover transmission from Taliya 1 to Butembo (20km, 30kV) and Butembo-Beni (50km, 30kV) (total $10.4m).

Distribution networks in Butembo and Beni – In a first phase, electrification will be focused on Butembo (approx. 10,000 connections), with only a few industrial consumers served in Beni. A second phase will provide another 10,000 connections in Beni.

2.3.3 Planned investments and financing sources

Investment requirements for the projects mentioned in the above section are summarised in Table 10. Annex A1.3 contains a more thorough assessment of the hydro power plant and distribution network investments of this project.

Table 10 Planned short-term investments Energie du Nord Kivu


Source of capital

Completion date

Other comments

Construction of Taliyia 1 HPP (12.1 MW)

Ongoing 19,356

ENK, DBSA debt, other long-term loans, end-users (connection fees), grants

2018

First phase of development (Ivugha and priority electrification in Butembo) financedwith own (STS) capital (to about $6m)

Financing from DBSA being negotiated ($34.7m)

Contribution from end-user (connection fees) expected to amount to $10.8m.

Construction of Ivugha HPP (2.4 MW)

Ongoing 4,508 March 2017

Construction of transmission lines for Beni and Butembo

Ongoing 11,292 Ivugha-Butembo (Mar-2017)

Taliya-Butembo-Beni (Dec-2017)

Construction of Butembo distribution

Ongoing 11,210 2,000 connections in 2017. 10,000 in 2018.

Construction of Beni distribution

Phase 2 11,210 2018

57,577

The total investment for this project (including generation, transmission and distribution) adds up to $57.6 million. The first phase of development (Ivugha phase 1 and priority



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electrification in Butembo) is currently on-going and financed with own (STS) capital to about $6 million.

The financing for Taliya 1, the remainder of the electrification of Butembo, and the transmission line between Beni and Butembo will be financed by DBSA with a long-term loan amounting to $34.7m. This loan does not cover investments in distribution infrastructure. Financial closure has been delayed due to the requirement of “off-take guarantees” of the bank, an issue which is currently being resolved.

Contribution from end-users (through connection fees) is expected to amount to $10.8m. However, the low ability of end-users to pay upfront connection fees remains a concern.

The remainder of capital requirements ($6m) is proposed for the EASE project in the form of long-term financing and grants for the extension of the network into less profitable areas where institutions of public interest (e.g. schools and clinics) may be located. Long-term finance could be provided through STS’s local bank (BCDC).

The above amount excludes investments from end-consumers relating to their internal wiring and electric appliances of SMEs, estimated at $3.8 million, which are also relevant for the EASE programme.


In summary, the proposed financing structure is shown in Table 11. The total contribution from the EASE programme to ENK would be of $18.4 million, broken down as follows:

Long-term loans to ENK: $3.9m for completion of long-term financing requirements of the Beni-Butembo scheme (distribution infrastructure)

Short-term loans to end-users: $11.6m for approx. 20,000 customers to finance their connection fees (paid to ENK) as well as other costs of internal wiring and electrical appliances.




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Table 11 ENK investments and financing



Table 12Impacts of Beni-Butembo project


Electricity access Number of connections: approx. 20,000 customers (13Amp) including both Beni and Butembo.

Connection of schools and hospitals.

By providing electricity to 20,000 customers, the project has an important social and economic impact. However, this remains a very small fraction (8%) of the combined population of Beni and Butembo.



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Electricity pricing The electricity price proposed for LV (0.30 $/kWh) seems high in comparison to the cost of supply (0.15 $/kWh) but justifiable if this is used to subsidise supply to institutions of public interest (schools, clinics) and to account for not all output of the HPP being sold.




ESIA of the HPPs has been finalised.

2.3.6 Key risks

Electricity demand - the financial viability of the project relies on the strong assumption that all of the HPP’s output is sold. The 20,000 households assumed to be supplied by the HPPs are expected to consume less than half of the output. The remainder (especially off-peak) should be sold to large consumers, or through the interconnection to the SNEL network and export of electricity.

2.4 Kananga

2.4.1 Description of developer (EnerKaC)

ENERKAC (Energie du Kasai Central) is a public-private venture including the government of the Kasaï Central province, private firm FLOW (owned by Mr. Laddy Mukendi and holder of concessions to develop hydropower plants) and private firm STAR. The creation of ENERKAC follows the signature of a Memorandum of Understanding between the provincial government and the South African firm Megatron Federal (represented by Mr. Laddy Mukendi in DRC) for the development of multiple sectors in the province, including energy. Megatron Federal is the electricity infrastructure division of the Ellies Group, based in Johannesburg. The company specialises in electricity generation, transmission and distribution.

CREC7 (China Railway Engineering Corporation), a Chinese civil engineering company, is also a shareholder of ENERKAC. CREC7is currently developing a PPP project for the construction of a 200km road connecting Kananga to Angola.



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In March 2016, ENERKAC invested in a hybrid power station of 2.5 MW (of which 0.75 MW of solar PV functioning as fuel saver) and connected it to the existing SNEL electricity grid. ENERKAC has signed a PPA for the provision of electricity and also an O&M contract for the distribution grid.


Kananga is the capital city of the Kasai Central province. It is currently poorly served by a thermal power station (2 MW) of SNEL that functions sporadically. The distribution network only covers certain areas of the city (Ndesha and Nganza) and is in poor condition. Currently 97% of the population in Kananga do not have access to electricity. The situation is expected to improve with the commissioning of the hybrid power plant, but additional investments in power generation and distribution are needed.

This project consists in constructing a 2.5 MW hydropower plant in the Tshibashi river, 10km northwest of Kananga. The main objective is to reduce the cost of electricity by reducing the use of the thermal power station. The Tshibashi HPP is in competition with other 4 hydropower projects:

Tshibuyia (7.5 MW) on the Miao river (developer FLOW)

Katende I (2.5 MW) on the Lulua river (developer CEGELEC, but blocked due to a political imbroglio)

Grand Katende (64 MW) on the Lulua river (project construction by Indian consortium ANGELIQUE International, currently at 60% of advancement, has been halted for the last 2 years)

Tshimbulu (3 MW) on the Lubi river

From the above, Katende I is best-placed both in terms of levelised cost of energy and location. It is however proposed for development at a later stage.

The breakdown of the short-term investments associated to ENERKAC are as follows:

Construction of Tshibashi HPP (2.5 MW) – investment of $7.9 million, completion expected in 2019. The HPP will supply electricity to the water utility REGIDESO and the population of Kananga.

Construction of transmission to line Tshibashi-Kananga – investment of $1.1m.

Rehabilitation and expansion of Kananga distribution network– investment of $4.9 million to connect 5,600 customers (reactivation of 1,600 existing connections and 4,000 new connections).

2.4.3 Planned investments and financing sources

Investment requirements for the projects mentioned in the above section are summarised in Table 13. Annex A1.4 contains a more thorough assessment of the hydro power plant and distribution network investments of this project.



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Table 13 Planned short-term investments ENERKAC


Source of capital

Completion date

Other comments

Construction of Tshibashi HPP (2.5 MW)

Pre-feasibility complete

7,864 ENERKAC, long-term loan, end-users (connection fees), grants

2019 Additional capacity will allow for about 4,000 connections.

The HPP will also supply a water pumping and treatment plant of REGIDESO.

Construction of transmission to line Tshibashi-Kananga

1,095

Rehabilitation and expansion of Kananga distribution network

Pre-feasibility complete

4,877 ENERKAC, long-term loan, end-users (connection fees), grants

2017-2019 Includes rehabilitation of existing network and expansion of network given additional capacity from Tshibashi

13,836

The total investment for this project (including generation, transmission and distribution) adds up to $13.8 million. The proposed financing structure is long-term debt (70%), equity (15%), connection fees (12%), and finally a grant for the connection of institutions of public interest (2%).

ENERKAC has not supplied information regarding their financing strategy for this project. Considering that this project will in part supply electricity to REGIDESO (pumping and water treatment plant, 1.5 MW), it has been assumed that a concessionary loan to cover half of the long-term debt requirement (i.e. $4.8 million) will be received from the government, similarly to Tshikapa.

The remainder of the long-term financing requirement ($4.8 million) could be supported by a credit line associated to the EASE programme. The solar PV hybrid plant was financed with a loan from a commercial bank (FBNBank), but at an interest rate of 18% (and backed by Megatron South Africa), which are considered prohibitive terms for this project.

In addition to the total investment associated to power generation, transmission and distribution, and additional $7.5 million has been estimated to be needed by end-consumers for their internal wiring and for electric appliances of SMEs, which are also relevant for the EASE programme.


In summary, the proposed financing structure is shown in Table 14. The total contribution from the EASE programme to ENERKAC would be of $13.6 million, broken down as follows:



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Long-term loans to ENERKAC: $4.8m for completion of long-term financing requirements. This is in addition of an assumed $4.8m concessionary loan linked to the supply of electricity to REGIDESO.

Short-term loans to end-users: $4.1m for approx. 5,600 customers to finance their connection fees (paid to ENERKAC) as well as other costs of internal wiring and electrical appliances.


Table 14 ENERKAC investments and financing

A financial analysis for the project (see annex A1.4) confirms its financial viability with an IRR of 16.7%. This result is under the strong assumption that the whole output of the Tshibashi HPP is sold. This would require identifying and selling electricity to large consumers in addition to selling electricity to households.





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Table 15 Impacts of ENERKAC project


Electricity access Number of connections: 5,600 (6 Amp) (1,600 associated to existing capacity and 4,000 associated to Tshibashi HPP)

By providing electricity to 5,600 customers, the project has an important social and economic impact. However, this remains a very small fraction (3%) of the population of Kananga.

Electrification of provincial capital and of REGIDESO

Project will provide electricity in the capital of Kasai Central (electrification of provincial capitals is a government priority) and to the water utility REGIDESO.

It should be noted that the supply to REGIDESO (1.5 MW) will impede the original objective of displacing the thermal capacity and thus reduce the cost of electricity. For this to be achieved, additional hydro capacity will need to be developed.

Electricity pricing The electricity price proposed for LV (0.25 $/kWh) seems high in comparison to the cost of supply (0.15 $/kWh) but justifiable if this is used to subsidise supply to institutions of public interest (schools, clinics) and to account for not all output of the HPP being sold. The electricity tariff for MV (0.14 $/kWh) corresponds approximately to the actual cost of power generation (0.06 $kWh and MV transmission (0.08 $/kWh).

It is important to note that the new hybrid power station is unlikely to allow for reductions in the cost of electricity (not until the HPP comes online). In particular, the solar PV plant does not operate during the peak consumption hours in the evening.

It should also be noted that the current electricity pricning structure (0.395 $/kWh for LV and 0.90 $/kWh for MV) is extremely high and would only allow for the most basic consumption of households.




ESIA of the Tshibashi HPP is yet to be conducted.

2.4.6 Key risks


Technical risks – The Tshibashi HPP has only been assessed at pre-feasibility stage. As mentioned before, this plant does not seem to be the least-cost candidate for Kananga in terms of resource and location, but the development of Katende 1 is not progressing due to political problems. The pre-feasibility study for the electricity network is incomplete and does not clearly present



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investments related to the rehabilitation of existing infrastructure versus new infrastructure.

Electricity demand – the financial viability of the project relies on the assumption that all of the HPP’s output is sold. The 4,000 households assumed to be supplied by this project are expected to consumer about 19% of the output. The remaining 81% should be sold to large consumers (industry), or through the interconnection to the SNEL network and export of electricity.

Institutional aspects – complex institutional structure. ENERKAC has a PPA with SNEL, who remains in charge of the O&M of the grid. However, ENERKAC is responsible for collecting revenue from end-customers, through pre-paid meters, and transferring these revenues to SNEL after deducting the amount corresponding to the PPA. ENERKAC will invest in the rehabilitation of the electricity grid, which they will also recover from SNEL in a similar way, through electricity tariffs. The detailed terms of this PPA are not known. The details of the agreement between ENERKAC and REGIDESO are also not known.

It should also be noted that the developer of the Tshibashi HPP, FLOW, is different from ENERKAC, but is rather a shareholder of the latter.

2.5 Summary of short-term investments

Table 16 summarises the investment requirements and financing structure proposed for the 4 short-terms projects presented in the above sections. The proposed financing from EASE (adding up to $82.8m) is broken down as follows:

Long-term loans to developers: $31.3m for completion of long-term financing requirements of power generation, transmission and distribution. This will allow for 33MW of renewable energy and the connection of 62,000 customers to electricity grids.

Short-term loans to end-users: $36.1 million to facilitate the payment of connection fees to corresponding operators as well as invest in their own electrical wiring and appliances.

Grant for the connection of public service institutions (hospitals, clinics, public lighting): $10.6 million, which includes their payment of connection fees as well as grants to the operator to expand the distribution network into the areas where these priority institutions are located.

Technical assistance budget, currently estimated at $5.0 million

The total EASE financing of $82.8 million represents 49% of the total capital ($170.1m) that would be mobilised by the concessionaires, other DFIs, and end-users.



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Table 16 Summary of short-term investments

Centrale 69,304 Prêt long terme 84,246

Prêt long terme autres DFI 53,116

Prêt long terme EASE 31,130

Transport 14,958 Capitaux propres 32,308

Distribution 57,692 Primes de branchement 21,167

Don réseau EASE 4,233

Total investissement concessionnaire 141,955 Total financement concessionnaire 141,955

dont production/transport 84,263 dont financement EASE 35,364

distribution 57,692 autres financements 106,591

Frais branchements 49,287 Prêt court terme EASE 36,121

dont ménages 39,821 dont ménages 33,471

PME 3,141 PME 2,650

Et. Sociaux 6,325 Don branchement EASE 6,325

Total frais de branchements 49,287 Total financement consommateurs 49,287

dont primes de branchement concessionnaire21,167 dont financement EASE 42,446

dépenses internes consommateurs 28,120 depots consommateurs 6,841

Total investissements 170,075 Total financements 170,075

dont concessionnaire 120,788 dont financement EASE 77,809

Consommateurs 49,287 autres financements 92,266

Principaux indicateurs Récapitulatatif financement EASE 82,809

Nombre de branchements (No) 62000 Prêt long terme 31,130

Nouvelle capacité ER (MW) 33 Prêt court terme 36,121

Abattement des gaz à effet de serre (tCo2) 116992 Don 10,558

Assistance technique 5,000

Investissements (000$) Financements (000$)



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3 Proposed financing mechanisms

This section includes a summary of the financial constraints of the short-term projects which were presented in the previous section, in order to understand how the EASE programme can help in addressing these.

3.1 Analysis of financial constraints of project developers

Based on the assessment of the four sub-projects that would constitute the short-term investment plan of EASE, the following are the main financial constraints found:

Insufficient capital to finance all infrastructure projects (power generation and distribution) in the pipeline. While a large part of the investment required is being financed by DFIs other than the WB (DBSA, AfDB), there remains a need for $31.1 million in long-term affordable finance (maturity of 10 years and above, interest rate below 7%) to implement the short-term projects described in section 2.

Local banks such as TMB and BCDC (which already work with Virunga and EDC/STS respectively) are liquidity-constrained and incapable of providing said affordable long-term debt.

Low ability of end-users to pay upfront connection fees and to invest in internal wiring and electric appliances. This includes households, SMEs, and public service institutions (hospitals, clinics, public lighting).

Households and SMEs could potentially afford connection fees if these are financed over a few years. Current terms provided by concessionaires EDC and Virunga have only allowed for a slow uptake.

Public service institutions (hospitals, clinics, public lighting) are assumed to require grants (non-reimbursable) to connect to the electricity grid.

3.2 Proposed financial support mechanisms

In order to overcome the financial constraints presented above, the EASE programme could support the selected sub-projects through the mechanisms summarised in Table 17 and Figure 1.



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Table 17 Possible forms of financial support of EASE


Proposed mechanism

Beneficiary Details Amount (short-term pipeline)

Other comments



Project developer

Long-term loans (5-20 years) at concessionary rates for electricity generation and distribution projects.

Subordinated debt to complement developer’s equity

$31.1m Possible to channel through developer's current bank (e.g. TMB and BCDC for Virunga and EDC/STS respectively)





$36.1m Repayment through electricity bill. Possible to implement through developer's current financial institutions

Need for accompanying support in overcoming administrative barriers to connect end-users.





$10.6m Possible to channel through existing foundations for management and transparency.

In addition to the mechanisms above, a credit enhancement support (guarantees) mechanism may be required to facilitate the implementation of the credit lines by local banks. A technical assistance component will also be required, in order to address sector barriers (such as policy and regulatory support for the government), project-specific barriers (to partially cover pre-development costs), and support the implementation of the programme (support to participating financial institutions and other stakeholders).



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Figure 1 Possible forms of financial support of EASE

The following sections provide additional details on these five components.

3.2.1 Generation and distribution concessionaire finance (long-term

concessionary loans)

This component will support the generation and distribution concessionaires to build adequate and cost efficient generation capacity, to rehabilitate, densify and extend distribution networks and connect households and SMEs within the concession area to the distribution grid, including through the provision of goods and materials for: (i) the construction of power plants, (ii) the expansion of existing medium voltage (“MV”) substations and construction of new MV substations, (iii) the construction of new MV lines, low voltage (“LV”) lines and MV/LV transformers; and (iv) household, SME connections; and (v) health clinics, schools and other social buildings connections and public lights.

IDA will finance the cost of goods and materials (mini hydropower, electric generators, solar PV arrays, wind turbines, diesel gen-sets, transformers, poles, conductors, insulators, switchgear, materials, etc.) for this component. The distribution concessionaire will support installation, with households contributions at a rate set by the Provincial Government, and possible private sector participation.

3.2.2 Customer finance (micro-loans to end-users)

This component will support the household and SME consumer within the distribution concession area to finance up-front connection and electricity supply service costs, including through the provision of goods and materials for: (i) the connection materials between the grid lines (MV or LV) and the electric board including the meter, (ii) the electric wiring rehabilitation or construction inside the consumer facility, (iii) the conversion of thermal engine to electric motor at SME production facility, (iv) other administrative and tax costs supported by the applicant consumer.



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IDA will finance the cost of goods, materials and services (line drop, fuse, meter, board, inside wiring, electric motors, administrative fees, tax charges, etc.) for this component. The eligible consumer will support connection costs, with down-payment at a rate proposed by the concessionaire and validated by the regulator with non-objection of the Provincial Government.

3.2.3 Grants for connection fees and electricity consumption

This component will support institutions providing services of public interest (e.g. schools, health facilities) within the distribution concession area to finance up-front connection and electricity supply service costs, including through the provision of goods and materials for: (i) the connection materials between the grid lines (MV or LV) and the electric board including the meter, (ii) the electric wiring rehabilitation or construction inside the facility, (iii) other administrative and tax costs supported by the applicant consumer.

IDA will finance the cost of goods, materials and services (line drop, fuse, meter, board, inside wiring, electric motors, administrative fees, tax charges, etc.) for this component.

3.2.4 Credit enhancement support

This component takes the form of loss risk sharing support for Participating Financial Institutions to be provided for the portfolio of sub-loans funded under components 1 and 2. PFIs will be able to obtain up to 50% recovery, capped at the limit of 10% of the disbursed amount of their respective credit lines, during a three year period from signing on the loan agreement with the finance institution(s), of losses which arise on the portfolio of sub-loans funded from the credit lines. On expiry of the 3 year period any unutilised grant funds which were allocated by the finance institutions to the projects will be available to be reallocated by the finance institutions to new projects under the EASE programme.

3.2.5 Technical assistance and project management

This component provides support to MERH, ARE, ANSER, partner concessionaires and partner financing institutions to: (i) strengthen institutional capacity to implement the National Action Agenda for Electricity Access; (ii) improve the policy and regulatory framework related to electrification and renewable energy; (iii) develop an integrated framework to plan electrification, monitor result and evaluate impacts; (iv) secure technical advice and consulting services, including on standards, technology assessment and technical design, economic and financial analysis, environmental and social impact management, procurement and financial management; and (v) improve Project management.

3.3 Project cost and financing

As presented in section 2.5 (Table 16), the total investment associated to the short-term investment plan of EASE is of $170.1 million. This includes all sources of financing. Proposed EASE financing amounts to $82.8 million (49%) of the total capital. A guarantee component (estimated at $7 million) and technical assistance and project management component (estimated at $5 million) would be additional, increasing the total EASE contribution to $89.8 million.



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Table 18 Project cost and financing (World Bank IDA funds)

Component Proposed mechanism Amount in short-term pipeline (USD million)

Generation and distribution concessionaire finance

Long-term concessionary loans 31.1

Customer finance Micro-loans to end-users 36.1


Grants 10.6

Credit enhancement support Loss risk-sharing support for PFIs 7.0

Technical assistance and project management

Technical assistance 5.0

89.9

More details on the proposed financing mechanisms can be found in annex A3.

3.4 Proposed institutional structure for implementation

In order to implement the above financial support mechanisms, a financial intermediary will be identified. The World Bank will allocate EASE funds through this intermediary, which will distribute funds among the participating financial institutions (commercial banks and others) according to the financing agreement between the World Bank and the government of DRC.

The financial intermediary will be responsible for signing financing agreements with participating banks and financial institutions, subject to the World Bank’s no objection. The following types of agreements are to be considered:

Financing agreement for long-term loans and subordinated debt for infrastructure projects

Financing agreement for short-/medium-term loans to end-users (residential and commercial) for payment of electricity connection fees and productive-use electrical equipment

Agreement for subsidies for the rehabilitation and connection of public service institutions (including subsidies for the extension of the electricity grid to supply these)

Agreement for Technical Assistance for training and capacity-building of the different stakeholders participating in the EASE project

The participating banks and financial institutions will be responsible for assessing the credit risk of their clients. Nevertheless, a guarantee mechanism to mitigate against this risk is to be put in place in order to facilitate and scale up loans to project developers and end-users of electricity.



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Figure 2 Proposed institutional structure for implementation

3.4.1 Role of MEHR

MERH will establish a national decision committee that will include representatives of UCM, ANSER, ARE, SNEL and Ministry of Finance. The decision committee will provide strategic guidance for the project and vet the prioritisation of the pipeline of sub-projects to be financed by participating credit institutions.

MERH will establish and operationalize a verification consultant that will be responsible for monitoring and evaluation (M&E) of the project.

3.4.2 Role of ANSER

The National Electrification Agency (ANSER), established in 2016 and in the course of being operationalized with the support of development partners, provides technical guidance for the Project. Prior full operationalization of ANSER, UCM of MERH will assume this responsibility.

ANSER will establish and operationalize a technical assistance facility (TAF) for grid and off-grid electrification. The TAF will oversee Component 1 through generation, distribution and commercialisation concessionaires as well as long term credit institutions, and will be directly responsible for TA activities under Component 4. The TAF will also oversee Component 2 through households and SME in coordination with distribution and commercialisation concessionaires as well as short term credit institutions. The TAF has a Manager and staff positions for planning, engineering, procurement and environmental and social management. The TAF will prepare, budget and implement annual work plans and manage TA funds in line with guidelines in the Financing Agreement.



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At the sub-national level (in target Provinces), ANSER will establish a local focal point that will coordinate technical assistance with provincial authorities, the generation, distribution and commercialisation concessionaires and partner banks at their jurisdiction.

To allow flexibility during implementation, ANSER’s Project Operation Manual (rather than the Financing Agreement) will describe implementation arrangements in more detail.

3.4.3 Role of Financial Intermediary

A fiduciary agent recruited by the government with the non-objection of the Bank will operate the respective Designated Accounts, close financing agreement with eligible partner banks, disburse project funds, reconcile bank accounts and apply for withdrawals, consolidate annual work plans, plan budgets, arrange annual audits and reports. The fiduciary agent includes finance staff with qualification and experience acceptable to IDA that will receive training and support from the TA component. The fiduciary agent will manage finances centrally for all project components.

The fiduciary agent will facilitate and liaise with participating financing institutions (commercial banks and others) to manage finances for all project components including payments, accounting recordings and reporting according to the guidelines of the financing agreement between the World Bank and the government of DRC.

The fiduciary agent will be responsible for signing financing sub-agreements with eligible banks and financial institutions, subject to the World Bank’s no objection.

The following types of sub-agreements are to be considered: (i) Financing agreement for long-term loans and subordinated debt for electrification infrastructure projects (component 1), (ii) Financing agreement for short-/medium-term loans to end-users (residential and commercial) for payment of electricity connection fees and productive-use electrical equipment (component 2), (iii) Agreement for subsidies for the rehabilitation and connection of social institutions (component 3), (iv) Agreement for Technical Assistance for training and capacity building of the different stakeholders participating in the EASE project (component 5).

3.4.4 Role of Participating Financial Institutions

The participating banks and financial institutions will be responsible for appraising projects proposed by developers to ensure economic and financial viability according to normal commercial practices.

They will provide loans to developers for eligible projects if they meet all requirements of the Operations Manual and PFIs’ internal appraisal requirements, and request refinancing of the loans provided.

The participating banks and financial institutions will be responsible for assessing the credit risk of their clients. Nevertheless, a guarantee mechanism to mitigate against this risk is to be put in place in order to facilitate and scale up loans to project developers and electricity end-users.



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4 Proposed technical assistance

Technical assistance includes both assistance to project developers and operators on the one side, as well as to other stakeholders involved in the implementation of the facility (financial intermediary, participating banks, etc.) and government institutions.

4.1 Technical assistance to project developers

Technical assistance to project sponsors will be provided in order to facilitate the development of projects with high impact in electricity access. Outputs will be private goods and therefore the beneficiary will be required to contribute through co-finance.

Examples of areas where TA support may be provided are provided in the following table.

Table 19 Technical assistance to project developers

Type of TA to project developers

Description

Technical and engineering support

Assistance to carry out, among others, feasibility studies, resource assessments, hydrological studies, engineering design (generation side), engineering design (distribution side).

Business and financial planning support

Support for business and financial processes including support to developing business plans, financial models, corporate structuring, financial management procedures, pre-finance advice and preparation.

Legal and compliance support

Support towards negotiating power purchase agreements with off-takers, bundling demand from small end-users and complying with central government, provincial government and regulators’ requirements including accessing permits, licences, approvals and no-objections. This also include environmental and social compliance.

Market assessments and market development support

Support to developers in implementing investment-grade market assessments that will provide information on sizing current and future demand.

4.2 Technical assistance to participating financial institutions

Technical support for the implementation of the EASE project includes:

Building capacity at the selected Financial Intermediary

Provide training to PFIs involved in co-financing, including training on due diligence and M&E;

Support to government institutions implicated in the implementation of the programme (MEHR, ANSER) with regards to their role in the EASE project



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Support services for project preparation, for example, mobilization of technical expertise; support for the financial structuring of transactions and coordination with local banks; and support to obtain required licenses and permits.

Monitoring and evaluation of socio-economic context of the projects supported; regular review of operational performance; and adjustment of proposals.

4.3 Technical assistance to government stakeholders

MERH and ANSER have low capacity in relation to electricity access (policy making, planning, design, implementation and supervision). ANSER will need strong support to strengthen its capacity as a focal agency for implementation.

The low institutional capacity of DRC entities and the lack of knowledge of international best practices will be mitigated through capacity building, use of in-house advisors, training and knowledge sharing on best practices, and strong implementation support by the WBG team. The project will also include capacity building at Province level.

Areas proposed for Technical Assistance to government stakeholders includes:

Technical assistance for provincial governments:

The new electricity law of June 2014 grants provinces the role of planning electricity access within their boundaries. Provincial governments are therefore in charge of granting concessions, licences and authorisations for electricity operators willing to develop projects within their perimeter of competence.

The recent administrative re-organisation of the country into 26 provinces adds a further level of complexity in the sector. The staff devoted to energy planning within the provincial governments, if existent, do not currently possess the human or financial capacity to undertake this new role. Support is therefore necessary for the organising institutions at the provincial level, for the capacity-strengthening of public agents, the introduction of standards and procedures for the evaluation of potential projects, etc.

Given this situation, it is proposed that the World Bank supports the provincial authorities that are relevant to the projects selected as initial investments under EASE.

Specific areas for TA:

Capacity-strengthening of provincial governments to issue concessions of power generation and distribution for projects below 50 MW that do not implicate other provinces

Capacity-strengthening of provincial governments to issue concessions of for the commercialisation of off-grid energy systems to provide electricity for poor households located far from the grid

Capacity-building relating to the authorisation of electricity pricing structures defined in the electricity distribution and commercialisation



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concessions, in order to protect final consumers while allowing for financial viability of private-sector projects

Capacity-building relating to the evaluation of projects proposed by private-sector developers with regards to their importance for the public interest

Technical support for the follow-up of the environmental and social management plans associated to electrification projects

Technical assistance for the rural electrification agency (ANSER):

Capacity-strengthening of ANSER in relation to validating the public interest of electrification projects proposed by private-sector developers.

Capacity-strengthening of ANSER to define and implement a strategy and communication plan with regards to the rural electrification initiative being launched by the government. This communication will be targeted to the main stakeholders in rural electrification, i.e. provincial authorities, operators (privates, public-private and public), consumers (households and SMEs) and other actors.

Capacity-strengthening of ANSER to develop a pipeline of projects, in collaboration with the government (national and provincial) and with financial institutions, that addresses DRC’s priorities as well as those of private initiatives.

Capacity-strengthening of ANSER to prepare financing agreements in relation to the implementation of the EASE project.

Technical assistance to the regulator (ARE)

Capacity-strengthening of ARE in relation to the verification of electricity tariffs in concession agreements for the distribution and commercialisation of electricity, in order to protect final consumers while allowing for the financial viability of private-sector projects



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5 Outline of a medium-to-long term access plan

A number of on-going initiatives, supported by the WB and other development partners, are in place to support institutional capacity building in the energy access sector, at both the national level and at the provincial level. In addition, specific planning exercises are being conducted for electricity access. For this reason, this section focuses on specific energy access projects which were evaluated during this assignment (based on the database of developers and projects submitted with the Mid-Term report, see Table 21).

5.1 On-going initiatives towards electricity access plan

There are a number of on-going (or agreed) initiatives to focus on the energy access planning at the national and provincial levels. Some of these are summarised in the table below.

Table 20 On-going initiatives towards electricity access plan

Development partner

Name of project Scope of project Timeline

WB EASE – Component 3 (Development of the sector)

Geospatial electrification planning for DRC (which will also establish priority projects and a short-term investment plan)

Pre-feasibility for the electrification of 12 new provincial capitals

Feasibility studies for medium-sized HPPs

2017-2018

USAID Support to MERH, including electricity access framework

Seconding staff to MERH (1 long-term expert and pool of short-term experts) to work on capacity-building, implementation of ANSER, and support to UCM.

On-going

AfDB MERH governance improvement

Operational set-up study for the Electricity sector regulation authority (ARE) ;

Operation set-up study for the National Agency for rural and peri-urban power services (ANSER);

Study into the institutional aspects of the electricity sector governance and provisional measures during its restructuring

Study into the capacity building of MERH services;

Master plans for rolling out electrification at provincial level.

2016-2018

SE4ALL (UNDP)

SEALL (Action Agenda)

Technical and financial support for DRC’s Action Agenda

Complete



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5.2 Specific energy-access projects to support in the medium

and long term

As part of this assignment, a database of electricity access projects (containing 32 entries) was constructed based on information obtained from multiple sources (government, private sector, development institutions, etc.). This database was presented in the mid-term report (and workshop) and used as the basis for the selection of four short-term projects to be supported by the EASE programme. This database is annexed to this submission again for convenience (as an MS Excel file).

Projects in the database were classified into short-term projects (which could materialise within 2-3 years and are thus eligible as EASE initial investments), medium-term projects which could materialise within 5 years (which require support in the form of technical assistance before they are at a stage where they can be financed), and long-term projects.

The results of these first two steps is presented in the table below, with short-term projects in the merit order resulting from the ranking, and the medium- and long-term projects presented in no particular order.



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Table 21 Classification of projects and ranking of short-term projects

SHORT TERM (0-3 years)

(Advanced stage of development)

MEDIUM TERM (3-5 yers)

(Priority projects, in need of technical assistance)

LONG TERM ( >5 years)

(To include in the pipeline of EASE)

8. Extension of distribution grid in Tshikapa (EDC)

9. Extension of distribution grid and construction of HPP Tshibashi for Kananga (ENERKAC)

10. Distribution grid linked to the Matebe HPP (VIRUNGA)

11. Distribution grid for Beni and Butembo (ENERGIE DU NORD KIVU)

12. Rehabilitation of the Lutshurukuru HPP for Kindu (NO SPONSOR*)

13. Hybrid solar PV power station and grid for Mbandaka (AES)

14. Rehabilitation of the Lubilanji I HPP, transmission to and distribution in Mbuji-Mayi (NO SPONSOR)

13. Rehabilitation of Bendera HPP for Kalemie (STS)

14. Rehabilitation of the Tshopo HPP (SNEL)

15. Electricité pour Kapanga II (ELKAP)

16. Rural electrification in the former Katanga province (by COOPERATIVES)

17. Rehabilitation of Mpiana Mwanga HPP (COMINIERES)

18. Construction of Kabinda HPP (NO SPONSOR)

19. Biomass and solar mini-grids in the Mai-Ndombe province (GHI INVESTMENT)

20. COMINGEM biomass power generation project (COMINGEM)

21. Rehabilitation of the Mobayi HPP and Nord-Equateur transmission and distribution network (NO SPONSOR)

22. Transmission and distribution from the Luvungi HPP (COCAT)

23. Rehabilitation of the Budana HPP (ELECTROKIMO)

24. Construction of Libongo Lokele HPP (NO SPONSOR)

4. Other HPP projects identified by the government

5. Other transmission and distribution projects identified by the government

6. Electrification of new provincial capitals (Buta, Isiro, Kenge, Mbandaka, Gemena, Lisala etc.)

* NO SPONSOR: projects was presented as a public initiative to be developed under a PPP, but no private sponsor has yet been identified

Projects that were NOT retained as initial investments of the EASE project (i.e. excluding the first four projects in the first column) could benefit from support from the WB in order to be implemented in the medium to long term. Areas where these projects need support vary depending on the nature of the project, and include:

Financing of infrastructure: some of the more advanced projects (e.g. Rehabilitation of Bendera HPP for Kalemie (STS), which has already signed a concession agreement with the government) may benefit from access to affordable long-term finance similarly to the projects in the short-term pipeline of EASE.

Financing pre-feasibility and feasibility studies: assistance to carry out, among others, feasibility studies, resource assessments, hydrological studies,



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engineering design (generation side), engineering design (distribution side). Some developers face issues raising early-stage capital to fund studies, elaborate business plans, etc. Developer ENERKAC obtained this type of support from DFID-funded ELAN RDC, which was very useful in starting projects which are currently materialising.

Regulatory support and obtaining permits: complying with central government, provincial government and regulators’ requirements including accessing permits, licences, approvals and no-objections. This also include environmental and social compliance. Some developers mentioned difficulties in obtaining permits for generation, transmission and distribution. The recent decentralisation of administration (i.e. new provincial governments) adds more uncertainty. Projects affecting more than one province may also have additional difficulties.

Procurement in case of PPP projects or public projects tendered to privates: priority projects with no identified private sponsor (e.g. Rehabilitation of the Lutshurukuru HPP for Kindu, Rehabilitation of the Lubilanji I HPP, transmission to and distribution in Mbuji-Mayi) could benefit from financial and technical support with regards to procurement practices by MERH.


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ANNEXES


Analysis of short-term projects

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A1.1 Tshikapa

A1.1.1 Investment memo

Memo sur les projets hydro et distribution de EDC à Tshikapa, 21 Septembre 2016 (in French)

Attached as separate file: A1.1.1 Tshikapa investment memo.pdf

A1.1.2 Financing application and financial model results

File contains contact details of developer, main features of project, details on proposed financing structure, and financial analysis.

Attached as separate file: A1.1.2 Tshikapa financial application.xlsx

A1.2 Virunga


Memo sur les projets hydro et distribution du parc des Virunga, 20 Septembre 2016 (in French)

Attached as separate file: A1.2.1 Virunga investment memo.pdf



Attached as separate file: A1.2.2 Virunga financing application.xlsx

A1.3 Beni-Butembo


Memo sur les projets hydro et distribution « Energie du Nord Kivu », 19 Septembre 2016 (in French)

Attached as separate file: A1.3.1 Beni-Butembo investment memo.pdf



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Attached as separate file: A1.3.2 Beni-Butembo financing application.xlsx

A1.4 Kananga


Memo sur les projets hydro et distribution de Kananga dans la province de Kasaï Central (Chef-lieu Kananga), 23 Septembre 2016 (in French)

Attached as separate file: A1.4.1 Kananga investment memo.pdf



Attached as separate file: A1.4.2 Kananga financing application.xlsx


Virunga connection application and tariffs

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Matebe/Rutshuru I: tariffs for connections and consumption of residential customers

VS signed an agreement with the Province allowing them to use flat tariffs for residential customers until March 2017. Promotional tariffs have therefore been introduced to stimulate demand;

All customers are charged 106 US$ for connection, but real connection costs can go up to as much as 6x the fee requested.

Three different flat tariffs exist for single-phase residential customers: 5 USD/month for 3A MCBs, 10 USD/month for 6A MCBs, 15 USD/month for 10A MCBs.

A provincial tax of 30 USD/connection adds on top of these tariffs (50 USD for SMEs, 100 USD for large consumers);

TVA is equal to 16%;

During the promotional time, VS requires a single advance payment for connection and one year of electricity;

Total cost for a 3A-connection would then sum at: (5 USD/month*12 months) * (1+16% for TVA) + 30 USD of provincial tax + 106 USD for the connection = 205.6 USD.

For 6A and 10A the initial costs for connection including one-year of electricity for residential customers amount at 272,5 USD and 344,8 USD;

The costs don’t include those of two certificates requested by the authority, as per concession signed with the Gov’t: the certificate of parcel property and the single-line diagram for electricity installation in the houses;

The certificate of parcel property is needed to apply for connections. The process to obtain the certificate is very complicated and expensive for households, which have to go through a process of certifications from the local chiefs all the way up to the province. This has a cost, which is estimated at 100 USD. Nowadays, the process has become more rapid;

The single-line diagram for electricity installations in houses is provided by independent electricians following works that cost on average 330 USD (300 USD of cables + 10% for labour). The works are carried out by expert validated by the local division of the Ministry of Energy, based at the ICCN. The division defines the list of electricians capable to carry out the work and ensure in-house safety, and it validates the single-line diagrams. VS doesn’t carry out in-house works. The electricians interface with the division, not the final users, to avoid extra-charges. The validation is estimated to have a cost of 10 USD.

The procedure is therefore the following:



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Households obtain the certificate of parcel property;

Households require VS to connect them to the grid, for which they pay between 205.6 USD and 344.8 USD (see above) on an account held by MECRECO in Rutshuru (VS agents are not allowed to deal with cash);

A verified electrician carries out in-house works and obtains the certificate of conformity from the local division of the Ministry of Energy.


Details of proposed financing mechanisms

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A3.1 Long-term concessionary loans

A3.1.1 Power generation

Promoteur: Concessionnaire de Production (Privé)

Dette long terme de financement des infrastructures de production

Bénéficiaire: Concessionnaire

Assiette d’investissement: Centrale hydroélectrique

Banque préférée: Banque de développement ou commerciale

Montant du prêt: 70% de l’investissement au maximum

Termes : 10 ans -2 ans de grâce – taux d’intérêt 6% maximum

Garantie exigée: Garantie de défaut de remboursement de l’emprunteur, garantie de consommation d’un groupe d’industriels

Statut: Accordé ou programmé pour soumission au comité de crédit

Assistance technique pour faciliter la transaction

Formation des officiers de crédit des banques partenaires pour le financement de centrale à énergie renouvelable raccordées à un réseau indépendant

A3.1.2 Power distribution

Promoteur: Concessionnaire de distribution (Privé)

Dette long terme de financement des infrastructures de distribution

Bénéficiaire: Concessionnaire de distribution

Assiette d’investissement: Réseau de transport et distribution

Banque Préférée: Banque partenaire EASE (développement ou commerciale)

Montant du prêt: 70% de l’investissement au maximum

Termes : 10 ans -1 an de grâce – taux d’intérêt 6% maximum

Garantie exigée: Garantie de défaut de remboursement de l’emprunteur



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Statut: demande de financement à envoyer

Assistance technique

Formation des officiers de crédit à l’analyse des projets d’accès

Formation des développeurs pour formuler leur demande de crédit pour financer les projets d’accès

Formation du personnel technique et commercial des développeurs

Formation au suivi du plan de gestion environnemental et social des développeurs et des contrôleurs

A3.2 Micro-loans to end-users

A3.2.1 Households

Promoteur: Concessionnaire de Production et Distribution (Privé)

Dette court terme de financement des branchements des ménages

Bénéficiaire: ménages

Assiette de financement: Câblage maison + Branchement + Frais juridiques + avance de consommation + premiers équipements électriques

Banque préférée: à définir

Montant du prêt: 70% des coûts éligibles + montant plafond par profil de ménage

Termes : 2-4 ans -6 mois de grâce – taux d’intérêt 8% au maximum

Garantie exigée: Titre de propriété; garantie de ressources; garantie de branchement; garantie de consommation

Statut: a définir


Assistance à la banque partenaire pour monter une offre de crédit moyen terme dédié au financement du branchement des ménages à l’électricité (notation rapide pour évaluer la solvabilité des ménages, remboursement du crédit par prélèvement sur la facture d’électricité, autorisation de transfert sur comptes agréés à partir du crédit)

Sensibilisation des ménages à l’offre de crédit pour le financement des branchements



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A3.2.2 SMEs


Dette court terme de financement des branchements des PME

Bénéficiaire: PME

Assiette de financement: Câblage entreprise + Branchement + Frais juridiques + avance de consommation + conversion des équipements thermiques

Banque préférée: à définir

Montant du prêt: 70% des coûts éligibles

Termes : 2-5 ans -6 mois de grâce – taux d’intérêt 7% au maximum

Garantie exigée: garantie financière: Bilan + historique bancaire + sécurisation; garantie de branchement; garantie de consommation

Statut: a définir


Assistance à la banque partenaire pour monter une offre de crédit court terme dédié au financement du branchement des PME à l’électricité

Sensibilisation des PME à l’offre de crédit pour le financement des branchements et l’électrification des machines

A3.3 Grants for connection fees and electricity consumption

A3.3.1 Grants to institutions


Subvention de branchement

Bénéficiaire: institutions publiques (hôpitaux, écoles, éclairage public)

Assiette de financement: Etude de réhabilitation du réseau électrique + travaux de réhabilitation + Branchement + Frais juridiques + avance de consommation + premiers équipements électriques

Source: gestionnaire du fonds de subvention

Montant de la subvention: forfaitaire et plafonné par profil de bénéficiaire



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Garantie exigée: garantie financière: historique bancaire + sécurisation; garantie de branchement; garantie de consommation

Statut: a définir


Prestations d’études pour la réhabilitation et la mise en conformité d’un réseau intérieur d’électricité

Prestations de travaux pour la réhabilitation et la mise en conformité d’un réseau intérieur d’électricité

Manuel de procédures du fonds de subvention

A3.3.2 Grants to concessionnaires


Subvention de réseau

Bénéficiaire: Concessionnaire de Production et Distribution

Assiette de financement: Extension de réseau dans des zones non rentables pour accès des établissements de service public

Source: gestionnaire du fonds de subvention

Montant de la subvention: forfaitaire et plafonné par cabine éligible

Garantie exigée: garantie financière: historique bancaire + sécurisation; garantie de branchement; garantie de consommation

Statut: a définir


A définir

A3.4 Guarantees


Garantie de défaut de remboursement de crédit

Bénéficiaire: banques commerciales partenaires

Garantie: +/- 50% des pertes de la banque en cas de défaut de remboursement



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Source: gestionnaire du fonds de garantie

Cout de la prime d’assurance: 0.5% - 1% du montant du crédit

Garantie exigée: attribution du crédit conformément aux pratiques prudentielles de la banque

Statut: a définir


A définir

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