report no. 6597-sl sierra leone: issues and options in the...

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Report No. 6597-SL

Sierra Leone: Issues and Optionsin the Energy Sector

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bft io do pint NPIbtd Bank Energy Sector Assessment ProgramThis d euntent hs.a amEnstricted distribution. Its contents may not be disclosedwithout at-ithorization from the Government the UNDP or the Wbrld Banik.

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JOINT UNDP/WORL) BANK ENERGY SECTOR ASSESSMENT PROCRA!M

Reports Already Issued

Country Date Number

Indonesia November 1981 3543-INDMauritius December 1981 3510-MASKenya May 1982 3800-KESri Lanka May 1982 3792-CEZim.babwe June 1982 3765-ZIltHaiti June 1982 3672-HAPapua New Guinea June 1982 3882-PNGBurundi June 1982 3778-BURwanda June 1982 3779-RWMalawi August 1982 3903-MALBangladesh October 1982 3873-BDZambia January 1983 41:0-ZATurkey March 1983 3877-TUBolivia April 1983 4213-BOFiji June 1983 4462-FIJSolomon Islands J.,re 1983 4404-SOLSene,.al Jtjl Y 1983 4182-SESudan Jliy 1983 4511-SUUganda JuI y 1983 4453-UCNigeria August 1983 4440-UNINep,a AugL3t, 1983 4474- NEPThe Gamibia N)vemrber 1983 4143-GMPeru Janu ary 1984 4677- EPCosta Rica January 1984 465,-CRL.esot.hn .Jan'.ary 1984 4676-LSOSeychelles nan ar-y 1984 4693-SEYMorocco March 1984 4157-.M0RPortug, al. Apri 1 1984 4824-PONiger May 1984 4642-NIREthiopia Julv 1984 4741-ETCape Verde August 1984 5073-CVGuinea 8issau August 1984 5083-GUBBotswana Spptember 1984 4998-BTSt. Vincent andthe Grenadines September 1984 5103-STV

St. Lucia September 1984 511l-SLUParaguay October 1984 5145-PATanlzania Novembier 1984 4969-TAYemen Arabh kepubi)C icecemn-,er 1984 4892-YARLiberia December 1984 5279-LBRIslamic R ep Li b tMaoritania tA)pril, 1985 5224-MAU

Jam?iri C r3 1 8 5466-EMr ')rv Co ....r a ! 3O- I C 5

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FOR OFFICIAL USE ONLYREPORT NO. 6597-SL

SIERRA LEONE

ISSUES AND OPTIONS IN THE ENERGY SECTOR

OCTOBER 1987

This is one of a series of reports of the joint UNDP/World Bank EnergySector Assessment Program. Financing for this work has been provided, inpart, by the UNDP Energy Account, and the work has been carried out bythe World Bank. This report has a restricted distribution. Its contentsmay not be disclosed without authorization of the Gcvernment, UNDP andthe World Bank.

ABSTRACT

41tLough Sierra Leone is favorablv endowed with energ,resources, particularly forestry and hydro-power, over the past few yearsiL has experienced severe shortages of energy supplies which havedisrupted economic activity. The major sources of difficulty are: (a) alack of foreign exchange to pay for oil imports and maintenance materialsfor plant and equipment; (b) an almost total dependence of the modernsector of the economy on imported energy products; and (c) weaknesses inenerSy sector institutions and lack of technical expertise for theplanning and management of energy resources. Despite these difficulties,there are grounds for optimism. The Government has initiated a programof economic reform which, if sustained, would relieve the foreignexchange shortage. At the same time, oil prices have declined in thepast year, providing an opportunity for the Covernment to develop acoherent policy for the energy sector to avoid future difficulties.

The assessment report focuses on the major short-term and long-term issues facing the sector. In the short-term there is a need to:(a) improve the supply o electricity and petroleum products;(b) strengthen demand management to encourage the effisient use andalLoca,ion of energy resources by reLating energy prices to the costs ofsupply; and (c) initiate institutional reform to improve sector coordina-tion, enhance the autonomy of the parastatal energy agencies, andincrease the incentives on the part of parastatals to supply energy atleast cost. Over the longer term, perhaps the most pressing issue is theextent to which it would be economic to develop indigenous energyresources and production facilities to substitute for high costimpotis. Within this context, the report considers options for meetingfuture power requirements, the dispcsition of the refinery, and astrategy for increasing fuelwood supplies. A priority energy investmentprogram is outlined in the report, together with a supporting plan fortechnical assistance and diagnostic studies.

ACRONYMS

BP British PetroleumDTI Department of Trade and IndustryFIC Forest Induetries CorporationIMF International 4onetary FundNPA National Power AuthorityNP National PetroleumMDEP Ministry of Development and Economic

PlanningMANRP " nistry of Agriculture, Natural Resources,

_nd ForestryMEP Ministry of Energy and PowerMIS Management Information SystemMOF Ministry of Finance

PlanningMOm Ministry of MinesMOT Ministry of Transport and CommunicationsMTI Ministry of Trade and IndustryNGO Non-governmental OrganizationSIERMOCO Sierra Leone Bauxite Mining Compar.ySLPRC Sierra Leone Petroleum Refining Company

ABBREVIATIONS

bpd barrel per dayDWT deadweight tonCi gigajouleGSP Government selling priceGWh gigawatt hourha hectareHV high voltagekcal kilocaloriekg kilogramkm kilometerkV kilovoltkWh kilowatt hour1 literLRMC long run marginal costLX low voltagem cubic meterMi megajouleMV medium voltageMT metric tonSRMC short run marginal costTOE tins of oil equivalent

CURRENCY EQUIVALENTS

US$1.00 = 5.10 Leones (Le)

This was the exchange rate at the time of the mission (February 1986) andis the rate used in the repcrt unless otherwise stated. The Leone hassince been floated.

ENERGY CONVERSION FACTORS

Energy

Form Calorific Value TOE/ton

(mil lion kilocalories/ton)

Biomass

Firewood (700 kg/m3) 3.5 0.343

Charcoal 6.9 0.676

Agricultural Residues 3.0 0.294

Petroleum Products

LPG 10.8 1.059

Gasoline 10.5 1.029

Jet Fuel 10.4 1.020

Kerosene 10.3 1.010

Gas Oil/Disel 10.2 1.00

Fuel Oil 9.5 0.941Crude Oil 10.2 1.00

Electricity

Calorific Value: 860 kcal/kWh (0.084 TOE/MWh)

Other

I metric ton of crude oil = 7.505 barrels of Nigerian Bonny Light1 Imperial gallon = 1.2 U.S. gallons

This report is based on the findings of an Energy Assessment missionwhich visited Sierra Leone in February 1986. The mission team consistedof: Messrs. A. Ferroukhi (Mission Leader): I. Aleem (Deputy MissionLeader); J. Boroumand (Researcher); P. Beard (Power Specialist); W.Matthews (Petroleum Refining and Distribution Specialist); R. de Lucia(Household Energy Specialist), and J. Rochet (Geologist). Mr. Aleem isthe principal author of the report. Secretarial support was provided byMs. Morrissa Young and Mr. Basha,at Ahmad.

TABLE OF COVITS

SUMMARY AND RECOMMENDATIONS .............................. .i

I. ENERGY A!JD THE ECONOMY ............................... * . 1The Economy ..... ....... 9.....**. 1External Trade Gap ........ ............................ 1Recent Developments ..... * *...*..................... 2Economic Scenarios for Sierra Leone..................... 3

Energy-Economy Interactions............................... 4Key Energy Issues .... *............................. ... 6Energy Consumption Patterns ...... ............. ........ 7Consumption Patterns Under Alternative Scenarios.......... 9Energy Resource Base...... .....9999 *99999999999999999999999 11Institutional Framework... ...........9 . ...... 9 99 12

II. PETROLEUM .................... o.......... . . . 13Introduction ...................... , 13Recent Developments and Subsector Organization.* ......... 13Short-Term Issues ....................... 16Procurement ........ .................................. 16Demand Management and Pricing ........................... 20The Role of the Government in ManagingShortages and Crises.. ......*s**............. 26

Long-Term Issues ..... ......... 00......**9*..... 28Future Demand for Petroleum Products.................... 28The Viability of the Refinery .......................... 30Recommendations .................................. 33Oil Exploration .................... 33Subsector Organization.. ... .. 99 36

Investment and Training Requirements...................... 37

III. ELECTRICITY ................. so,.... 40Introductio. .................... 40Institutional Reform: Raising the Effectiveness ofNPA Management ................................a....... 42

Institutional Framework .............999......99.9.99..... S., 42Managerial and Technical Problems Within NPA............. 44aecommendations .... *999999999999999999999999 999999999999 45

Physical Rehabilitation of the Public Power Supply ........ 47Concerns About Existing Rehabilitation Plans ............ 51

Tariff Policy, Demand Management, and FinancialRehabilitation..* ......................... 52Demand and Supply Side implications of Tariff Policy ...... 53Supply Costs and Tariffs ................................ 57Recommendations ......O-..... . .. .... 59

Lcns-Term Issues ..................... . . . ... ..... ............ *0 *e@. 60Bumbuna vs. Other Development Options..................... 61Development Options for Provincial Load Centers........... 71

Reconmendationso.... ... .. ........ *******. .......* *..*. 73Investmento .. *.ooo.o.o.ooo..o..oe*ooooo.o....................... 75

Trends 1981-1986 ..' o o.$..0 .06 0 0 6 4 ..............0.................. 75Future Requirements. ................... ... . . . . .. 77

IV. WOODFUELS/HOUSEHOLD ENERGY.......................... 78Reasons for Concern..... ... .o.9. .... o..o.o. .o** **ooooo * 78Characteristics of Household Energy Use...... ........ 0... 79Woodfuel Supply and Demand .....o.... ...... ......... .... 82Household Energy/Woodfuel Strategy ............... ................. 85

Supply Side Measures... .................... o..,.... 90Main Supply Side Recommendations........................ 9)Changes in the Inst;tutional Frameworko ............ o 94Recommendations. . ....... ... .**oGo...o........... 96Evaluation of the Potential of Other Energy Sources ..... 96Recommendationso.......................................... 100

Investment and Technical Assistance Program...o.oa...to... 100

V. ENERGY SECI'OR MANAGEMEN.. .... o .... ... o..... o. .o..0.0.. 102Introduction ......... .. .............. 102Energy Sector Coordination and Planning ..... ,.,,........ 102

Problems with Existing Institutional Frameworko...... too 102Reco m mendations... o ............................ 00 103

Investment Planning/Aid Coordination...............*... 104Availability of Funds. .. .104Investment Requirementsq.........m.. . . ........ .. . . . . 105Aid Coordination and Monitoring-o............... ........ 106

TABLES

1.1 Scenarios (Summary) ....................... ..... 41.2 Petroleum Imports and External Trade . .............. 51.3 Structure of Final Energy Consumption (1984) ............. 0 81.4 Final Energy Consumption, 1995, Accelerated

Growth Scenario..........o.......to.........o*. .......... 91.5 Final Energy Consumption, 1995, Base Case Scenario ..... o...... 102.1 P2troleum Subsector--Basic Data ........ o ...... ....... 142.2 Sierra Leone Crude Oil Imports ............... ... o.......... 172.3 Comparison of Official Retail Prices in 1985................. 202.4 Sierra Leone Official Petroleum Product Prices

and Economic Cost of Supply u.......... - ..... . .. 212.5 Comparison of Official 1985 Ex-Refinery Prices

with Hypothetical Costs of Direct Imports .................... 222.6 Revise,i Petroleum Product Price Structure................... 242.7 Forecast Summary of Inland and Bunker Der,|and: Accelerated

Growth Scenario with Reduced Pumbuna .... .. ..... ...... 292.8 Forecast Summary of Inland and Bunker Demand: Base

Case Scenario with Reduced Bumbuna .................. 29

2.9 Refinery Ownership. ......................... ........... .. .0 302.10 Refirery Investments... .. .. . .. .. . .. . . . ... .*. .... 373.1 Power 3ubsector--Basic Data ... 413.2 Power Plants on Western Area G r i d 483.3 Casoi Ordered and Supplied (1985) 503.4 NPA Generation and Sales ................ 533.5 NPA long Run Supply Costs ... 573.6 Demand Forecast ... 613.7 Bumbuna Hydro Project ... 643.8 Comparison of Bumbuna Options ... 673.9 Bumbuna Surplus Energy in Wet Season (AC Scenario) ... ...... 713.10 Details of Sniall Hydro Schemes....... 723.11 Estimated Investment in NPA Assets FY1981-86 753.12 Estimates of NPA Investment Requirements FY1987-91:

Base Case Scenario................ ..... I 763.13 Estimates of NPA Investment Requirements FY1987-93:

Accelerated Growth Scenario ......... ..... ... . 764.1 Household Energy Expenditures as a Share of Monthly Income... 784.2 Estimated Household Energy Consumption, 1 9 8 .804.3 Comparative Costs of Cooking Fuel.s in Freetown,

February 1986 ........... ................................. 814.4 Forest Resources and Annual Wood Incre ms . . .834.5 Woodfuel Demand (1986) ....................................... 844.6 ComparaLive Cooking Cost of ALternative Stoves. 874.7 Investment Program (1987-91): Household and

Renewables Sectorse.. .. ........... 1015.1 Energy Sector Public Investment Requirements, 1987-91 105

ANNEXES

1 Scenario Details.. ....... 1082 Energy Balances ............................................... 1123 Retail Petroleum Product Price3 .. 1174 Crude Oil arid Product Price Forecast ..... 1185 SLPRC Refinery Economics ........... .. O. 1206 Petroleum Concessions . .... 1217 Autogeneration of Electricity in the Area of Western

Power Grid ............... 1228 Regression Analysis . ...... ... 1269 Relationship of Load Forecast, GDP and

Electricity Generation ..... 12910 H:storical Pattern of Tariffs .............................. 13111 Generation Cost Estimates. .................. .. ......... 13212 Future Generation and Consumption of Electricity,

by Scenari G . 13913 Alternative Expansion Pans ... 14214 Bumbuna Capital Cost Estimates . . 14915 Future Coal and Crude Oil Prices, by Scenario . ............... 15816 Effect of Bumbuna Scheme on Foreign Exchange Balance.. 159

17 Future NPA Supply Costs andTariffs.......................... 16118 Household Energy Survey Results .............................. 16719 Retail Price Movements in Household Fuels.................... 16920 Current Cost/Price Build-up for Fuelwood Retailed in

Two Different Areas of Freetown, February 19868 6............. 17021 Energy Putential from Availabl.e Agricultural Residues

in Sierra Leone....... ................ *****....********** 17122 Lignite Deposits it. Sierra Leone--Yema Araa 172

NAPS

IBRD 20078 Sierra LeoneIBRD 20079 Power System and Potential Hydroelectric SitesIBRD 20080 Natural Forest Regions

SUMMARY AND RECOMMATIONS

Overview of Energy and the Economy

1. Energy consumption in Sierra Leone is dominated by Luelwoodwhich accounts for about 80% of the energy used. The remaining 20% issupplied by imported oil. Fuelwood is the traditional form oi energy andis used almost exclusively by households for cooking and for traditionalcraft activities. Petroleum, on the other hand, is the most inportantsource of energy for the modern sector of the economy. In recent yearsforeign exchange difficulties have restrained petroleum imports and re-duced the share of oil consumption in the overall energy balance. Futuregrowth in consumption is expected to show a return to the longer termhistorical trend of a shift towards modein fuels, primarily oil but alsohydroelectric power, a resource which is still virtually untapped.

2. Gross energy consumption (including conversion and distributionlosses) is estimated to have grown between 1975 and 1984 at an annualrate of 1.7% to some 1.2 million tons of oil equivalent (toe). Over thesame period GDP growth has been sluggish, averaging about 2%, so that theratio of the growth in energy consumption to that in GDP has been lessthan one, which is below the average fo;- most developing countries.Petroleum consumption peaked in 1979 at around 178,000 tons and has beenon a declining trend since then reaching 167,000 tons in 1984. The 1984gross energy consumption of 1.2 million toe represents a per capitaconsumption of 310 kilograms of oil equivalent (kgoe); per capita con-sumption of commercial energy was about 60 kgoe, sqich is about averagefor countries with similar income per capita (US$330 in 1983). House-holds and transportation were the two largest users of energy in 1984,representing 86% and 6% of final dem-nd. Industry ranked third with 5%of demand.

3. Sierra Leone, with a population of 3.7 million people, isreasonably well endowed with energy resources, particularly forestry andhydroelectric power. The annual supply of woodfuels from the country'sforests is estimated at around 4 million m3 , about 10% of which isconsumed in Freetown. Annull sustainable yields of wood are estimated atbetween 9 and 15 million m but a large part of this supply is not eco-nomically accessible and there are growing signs of regional shortagesnear urban areas. There is an extensive network of rivers and tribu-taries which provide a las-ge hydroelectric power potential conservativelyestimated at 1,200 MW. Technically, and economically, the most promisingsite is at Bumbuna, on the Seli River, with an ultimate potential of305 MW of installed capacity. Around 20 mini-hydro sites have also beenidentified but their feasibility has yet to be fully evaluated. The onlydevelopment so far has been a mini-hydro plant of 4 MW capacity which isbe.ng built with Chinese help. As far as petroleum is concerned, thereis a potential for offshore reserves but limited exploration efforts haveprevented an evalJation of this potential.

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4. The oil price shocks of the 1970's had caught Sierra Leonetotally unprepared to cope with the "energy crisis." It was entirelydependent on petroleum imports for satisfying its non-traditional energyneeds and had not developed any indigenous energy resources to substitutefor high cost imports. At the same time, as in many other developingcountries, there was practically no institutional structure, little or notechnical expertise, and modest economic resources to manage this complexproblem. The oil price shocks arrived at a time when the country wasalready facing foreign exchange difficulties because of declining mineralexports. The net result of these developments has been a severe shortageof commercial energy supplies since the early 1980s with attendant dis-ruptions to economic activity.

5. While the problems currently faced by the energy sector aresevere, there are grounds for optimism. Firstly, discussions currentlyunderway with the International Monetary Fund and the World Bank should,if an agreement is suc:cessfully concluded, help to ease the foreign ex-change difficulties, a problem at the center of many of the energysector's difficulties. Secondly, the price of oil has declined signi-ficantly in the past year. While the future course of oil prices isuncertain, if, as expected, prices remain so over the next two to threeyears, then Sierra Leone has a good opportur ;y to prepare itself for anysharp increases in the future price of oil. The Government should aim tomaximize the benefits to the economy from the current low oil priceenvironment while developing a coherent policy for the energy sector thatwould help avoid a recurrence of the problems currently facing thesector. In particular the Government should urgently consider optionJwhich would: (a) encourage the efficient utilization of resources avail-able to the energy sector (focusing on projects with high rates ofeconomic return rather than those saving foreign exchange at low rates ofreturn); (b) enhance the use of domestic energy resources where economic;(c) diversify the country's fuel mix away from a high dependence on oil;and (d) develop an incentive framework and institutional structurecapable of adapting to and benefiting from rapidly changing conditions ininternaLional energy markets.

6. Within the above setting, this report focuses on the mainshort- and long-term issues in the sector, evaluating the options open tothe Government and making recommendations as appropriate.

Short-Term Issues

7. The assessment mission found the energy sector in a seriousstate of deterioration which has resulted from, and contributed to, theprolonged stagnation in the economy. While oil imports have beenrestricted for some time, the cutback in 1985 was particularly severewith net petroleum imports declining about 40% below 1984 levels. Thisdevelopment was accompan ed by additional limitations on the imports ofspares by the power utility. The resulting disruption to the cconomy

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from the lack of fuel was significant, especially in rural areas. Trans-portation services were greatly curtailed, and electricity supplieslimited to a few hours a day with some areas going without electricityfor as long as a month. Even the output of diamonds--a major foreignexchange earner--was reported to be declining sharply because fuel wasnot available to power mining equipment. Fuel shortages have also led toa rampant black market in petroleum products, and encouraged inter-fuelsubstitution: urban households have increasingly switched over to thetraditional fuels, enabling fuelwood prices to rise 150% in real termsbetween 1984 and 1g8', thereby imposing a heavy burden on low incomegroups. Similarly, to obtain more reliable electricity supplies, largeindustrial, commercial, and well-off residential consumers have beenimporting diesel generating sets financed partly from foreign exchangepurchased in the "parallel" market, outside the banking system. Over thepast three years, the cost of importing these generating sets is conser-vatively valued at about $10 million--further exacerbating foreign ex-change shortages.

8. The most urgent short-term needs are to improve the supply ofelectricity and petroleum products and strengthen demand management andinstitutions.

Shortage of Electricity and Petroleum_Products

9. In the petroleum subsector, supply shortages due to foreignexchanoe difficulties have been exacerbated by inefficiencies in theprocedures for procuring crude for the refinery. There are two problemsassociated with crude supplies: 'a) the supplies are not at least cost,and (b) ad hoc arrangements have led to delays in allocating foreignexchange for crude purchases.

10. The mission found that Sierra Leone has been paying an "excess"margin between c.i.f. and f.o.b. values of about $2.50/barrel on crudesupplies, equivalent to about $10 million over the past three years(1983-85). Excessive margins of similar magnitude also appeared to havebeen paid in the last two years (1981-82) of an earlier agreement withthe oil company shareholders of the refinery. This is in large part dueto the use of open-ended contracts at fixed terms with one supplier.Such contracts are non-competitive and invite monopoly rents whether thesupplier is an oil company or, as at the time of the mission, a tradingagent implementing the shipping arrangements for the Government's state-to-state deal with Nigeria. Currently, however, the ability of theGovernment to obtain more competitive terms for oil supplies is compro-mised by the non-payment of the outstanding debt (totaling $58 million)to the oil company shareholders of the refinery for past deliveries ofcrude: the presence of the debt limits the number of suppliers preparedto supply crude.

II. Despite the excessive margins paid for crude supplies overrecent years, deliveries have not always arrived when needed. Foreignexchange problems have resulted in a last minute scramble to find suffi-

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c,ent funds for each cargo. There is no system for budgetitig or allo-cating foreign exchange for purchasing oil supplies on an annual basisand then properly programming this allocation to each shipment.

12. The mission recommends that the system for procuring crude oilsupplies should be reorganized and made more competitive. The state-to-state deal with Nigeria is in Sierra Leone's interest and should beretained; this recommendation is based on considerations of proximity(the refinery's economic viability, as discussed below, is closely tiedto the availability of Nigerian crude as it provides transport costadvantages over other crudes), and the suitability of the crude to localmarket demand and assumes that Nigeria will continue, as in the past, tooffer the crude at competitive terms relative to the international mar-ket. However, international bids should be invited for the management ofcrude supply and shipping arrangements At the same time, the system forallocating available foreign exchange should be reorganized so thatdelays in oil payments can be avoided. These measures together with anincrease in cargo sizes (to 30,000 tons from the current level of 20,000tons) should comfortably reduce margins by $3/barrel, equivalent to morethan $5 million a year, and enhance the reliability of oil supplies.However, effective implementation of such an arrangement will require atleast a demonstrated government willingness to address the problem of therefinery's existing debt.

13. In the power subsector, the public utlity is in a state ofphysical and financial disrepair, reflecting years of neglect, poormanagement and a shortage of foreign exchange. At the time of themission, less than half the installed generating capacity was in service,between a third and a half of the electricity generated was being lost intechnical and non-technical losses, and consumers were experiencingfrequent and prolonged supply interruptions. These problems intensifiedfurther in the mont[s following the mission, reaching crisis proportionsin September 1986 when only 6 MW of capacity was available to service anestimated peak demand of 25 MW. While supply has improved since thattime and demand of about 18 MW is currently being met, the fact remainsthat the National Power Authority (NPA) is unable to meet its responsi-bilities of providing adequate and reliaole power supplies. NPA'scurrent difficulties are the latest in a long history of managerial,technical, and financial problems at the utility during the last twentyyears.

14. The major short-term issue relates to the institutional,physical, ana financial prerequisites for a successful rehabilitationprogram. These include: (a) an institutional framework which wouldallow the utility to operate autonomously, give adequate compensation toskilled staff, and ensure the effectiveness of senior management; (b) re-pairs and improvements to existing generating facilities; and (c) changesin tariffs and access to required levels of foreign exchange. Components(a) ani (c) of the rehabilitation programn are discussed below underinstitutional reform and demand management. In terms of physicalrehabil:.tation, the operational deficiencies associated with the decline

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in power supplies arise out of two related factors: a lack of preventivemaintenance and a chronic shortage of spare parts due to foreign exchangelimitations.

15. The main priority is for arrangements to be made for over-hauling and repairing all the generating plant at the Kingtom stationnear Freetown, along with the importation of spare parts to maintain thesystem in a good state of repair. Enhancing the reliability of powersupplies will save the country an estimated $4 million annually bydiscouraging the importation and use of small (and less efficient interms of fuel consumption) private generating sets. These savings wouldhelp to pay for a major part of the estimated $10 million of necessaryrehabilitation expenditures. At the same time, an independent reviewshould be carriei out urgently to determine the details of therehabilitation program, including the technical and economic viability ofrepairing the (three) MAN units at Kingtom which are nearing the end oftheir normal working lives. Contingency plans should also be made fornew generating capacity to replace these units in case they cannct beeconomically repaired.

Institutional Reform

16. Institutional deficiencies represent a major obstacle to theefficient and reliable supply of energy. These deficiencies include:(a) the absence of a single ministry for formulating and coordinatingenergy sector policy, and (b) the absenc' of incentives on the part ofparastatals to supply energy at least cost. In the case of both electri-city and refining the last problem is further complicated by a blurringof the distinction between government and parastatal roles in operationsand investment. The measures proposed below complement the components ofan economy-widp restructuring of the public enterprise sector proposed aspart of the Structural Adjustment Loan program, currently under discus-sion between the Government and the World Bank. In addressing theseproblems, the mission evaluated (i) the scope for coordinating policy inthe energy sector, (ii) the effects of lack of autonomy on the function-ing of the parastatals, especially NPA, and (iii) the scope and optionsfor reducing costs in the parastatal companies.

17. Absence of Coordination. There is no single ministry orautonomous body with the political mandate and status to coordinate theactivities of the various ministries and develop a coherent energypolicy. At the moment, there are five ministries dealing with specificenergy subjects in an uncoordinated manner. This lack of coordinationhas, in turn, contributed to the chaos experienced during fuel short-ages. The Ministry of Energy and Power (MEP) is in theory responsiblefor coordinating all energy activities. In practice, the MEP's mainpreoccupation has been with electrical power and water distribution; theMEP does not, in effect, have the status or the political mandate tocarry out a sector coordination role. To strengthen sector management,it is recommended that the MEP should be given the status and supportnecessary for coordinating activities in the energy sector. In addition,

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to make the proposal effective, the institutional responsibility forcrude oil and product imports, refining, and oil product marketing whichcurrently rests with the Ministry of Trade and Industry (MTI) should betransferred to MEP. At the same time, MEP should assume responsibilityfor overseeing conservation policy and programs. For implementing thesechanges, it is recommended that (a) appropriate resources should be madeavailable to MEP; (b) MEP should draft a detailed proposal of what itsenhanced role would entail and how it plans to carry out its increasedresponsibility; and (c) consensus should be established at the highestlevels of Government (i.e., within the Cabinet of Ministers) for such achange, especially as it will involve, as envisaged, a transfer ofresponsibilities for an important portfolio, namely petroleum supply,refining and distribution.

18. Separation of commercial and administrative functions. Thereis both political interference with, and lack of management autonomyamong, the parastatal energy agencies (NPA, NP, the Refinery). Thisproblem applies particularly to NPA, which operates as a department ofMEP. The General Manager )f NPA lacks a.,tonomy and is subject to dailyinterference from the MEP. The 1982 NPA Act is intended to provide NPAwith a high degree of autonomy through an independent Board. In practicethis is not the case, and the Board itself is highly susceptible to MEPinterference. The lack of autonomy undermines the effectiveness of NPAManagement. To increase the effectiveness of NPA, the NPA Act should bereviewed and modified to give the Authority greater autonomy in itsmanagement. This legal separation should be carried out as part of anaction program for changing the institutional framework within which NPAoperates before the implementation of any physical rehabilitationmeasures. Unless such a change takes place, physical and financialrehabilitation will not bring about a sustained improvement in the publicpower supply, and which should be the objective of the rehabilitationprogram. More recently, there have been improvements in the relationshipbetween NPA and MEP with the appointment of a new Board. While thesechanges are in the right direction, the basic problems of autonomy andlack of representation from the businesb community remain: (a) the Boardis still over-represented by incumbent or ex-civil service per3onnel;(b) it does not have members from the private sector, which would providethe Board with the benefits of sound commercial expertise; and (c) thelimited autonomy that the Board may enjoy currently is dependent on thegood will of the incumbent Minister of Energy and Power. The Government,while agreeing to the recommendation in principle, has indicated thatpulitical constraints will, at present, prevent changes tn the NPA Act.However, it has agreed to these changes as a target for the future.

19. Other components of an action program should include:

(a) a mechanism to ensure that (i) NPA can regularly set tariffsat levels which allow it to recover its costs on an agreedbasis, and (ii) it has access to sufficient foreign exchangefor importing spare parts and carrying out routine equipmentmaintenance;

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(b) a requirement that in return for greater legal and financialautonomy, NPA should be run on a ccmmercial basis achieving atarget rate of return and be fully accountable for its perfor-mance in providing reliable power supplies;

(c) the focusing of MEP's efforts on power sector policy formula-tion and coordination--one of its first tasks should be thedevelopment of a policy statement outlining the Government'sstrategy for the sector in the short and longer term; and

(d) an increase in the remuneration of skilled NPA staff to makethem competitive with the private sector. (This will require apremium to be paid above public service scales as a compensa-tion for technical skills.)

20. Cost effectiveness and competition. The cost effectiveness ofthe operations affecting the parastatal companies, the Sierra LeonePetroleum Refining Company (SLPRC) and the power utility (NPA) can beenhanced through greater market competition combined with a strengthuningof the monitoring and regulatory functions of Government.

21. The possibility of reducing crude procurement costs by puttingup supply contracts to international tender has already been touched uponabove. A rela.ed area, under the supervision of the Department of Tradeand Industry (DTI), where current arrangements are not conducive to leastcost supply is that of petroleum product supplies. Because SLPRC has amonopoly over the supply of refined products to the domestic market, thecountry cannot take advantage of favorable conditions in internationalmarkets by importing products when they are cheaper than the refinery'soutput. The economic losses associated with these arrangements may onoccasion be considerable and are not likely to be entirely eliminated bymeasures for more efficient use of the refinery as proposed below. DTI(or, if responsibilities are transferred, MEP) should therefore considerthe possibilities for introducing competition into product supplyarrangements. One possibility is to open up domestic product market tointernational tender. Another alternative is to require SLPRC to supplyrefined products from the cheapest possible source, combined with alinking of ex-refinery prices to spot markets.

22. NPA has a monopoly on national electricity supply. At present,the role of private electricity suppliers is confined to autogenera-tion. NPA exercises this monopoly in the provinces by managing andcoordinating the operations of 22 widely dispersed provincial stations.This coordination is a costly overhead and NPA should consider otheroptions for increasing cost effectiveness. These should include:(a) decentralization of operations so that they can be managed on a localbasis, (b) selling the Provincial Systems to the private sector or localcommunity groups, when such possibilities arise, and (c) establishingjoint ventures with the mining companies for generation facilities thatsupply both the mines and local communities.

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23. Cost effectiveness has also been weakened by deficiencies inthe monitoring and regulatory functions of gcvernment. The regulatoryrole normally pleyed by government is reduced because of a severe lack ofresources (Forestry Department), lack of access to petroleum marketintelligence (MTI), and organizational deficiencies such as the abselceof planning cells. The full impact of this deficiency is difficult toquantify but, as an example, US$5 million per annum in excess paymentsfor oil imports over the past five years, as already discussed above,could have been avoided if the DTI could have monitored the oil marketnore effectively. It is, therefore, important that more resources aremade available to the DTI (or, if responsibilities are transferred, MEP)and the Forestry Department to carry out their regulatory functienseffectively.

Demand Management

24. In conjunction with supply side measures the problem of severeenergy shortages should be addressed Lhrough better demand management,primarily through pricing policies which reflect economic cost. Inparticular, prices for eLectricity and petroleum products need to beraised significantly to cover the opportunity cost of supplies atrealistic exchange races. The prices of petroleum products in SierraLeone are well below their opportunity cost to the economy; even afterthe recent increases announced in the April 1987 budget, retail pricesare about 25% below the level which the mission estimates should becharged to reflect (a) the opportunity cost of oil products, based oncrude oil prices of $20 per barrel, and (b) a tax structure which is anaverage by West African standards. The Government lacks a cohesivedemand management policy. Both the level and str'icture of prices need tobe reviewed immediately to eliminate pricing distostions and reduce thesubsidies that magnify the financial troubles of the Government andsubsector organizations such as the refinery. Beyond this pricingreview, the Government should reconsider the objectives and policyunderlying the establishment of ex-refinery and retail prices, parti-cularly at this time of uncertainty in international oil markets.Furthermore, a pricing review should be carried cut in conjunction withan evaluation of product supply strategy (as discussed above in the con-text of institutional reform at the refinery) and not independent of it.

25. Together with a strategy for rehabilitating the supply ofelectricity, the problem of power shortages should also be addressedthrough better demand management including changes in power tariffpolicy. In the long run, tariff increases would help to alleviateshortages by dampening demand, but because of the magnitude of suppresseddemand, the more immediate impact of tariff increases is likely to comefrom an improvement in supplies through a strengthening of NPA'sfinances. At the time of the mission, tariffs were well below both theshort and long run costs of providing power and thus contributed to NPA'sprecarious finances.

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26. In November 1986 the Government, in discussions with the Bank,agreed to raise the tariffs by 300% to Le 3.75/kWh (or US15c/kWh, at anexchange rate of Le 25/$). This is a move in the right direction.However, given the recent rapid decline in the value of the Leone (inMarch/April 1987 the official exchange rate was fluctuating in the rangef Le 45-<5/$) further increases will be necessary to bring tariffs intoline with 'he financial and economic costs of supply. Tariffs need beraised to about US20C/kWh to allow full cost recovery and an 8% return onrevalued assets (as agreed with the Bank). Tariffs, if they are set atthese levels, will be at the upper end of the range (UScIO-20/kWh) forWest African countries. In part, this reflects rhe relatively high levelof technical and non-technical losses in Sierra Leone and, hence, theurgent need to improve the efficiency of public power supplies. Whilelosses are likely to decline in future as a result of efficiencyimprovements, it is expected that they will remain at sufficiently highlevels (15-20%) to maintain the pressure on long run supply costs; thelong run marginal costs of supply to customers on the Western Area gridhas been estimated by the mission to be within the range of US16.5-23.8c/kWh.

27. In addition to the issue of tariff levels, there are variousdistortions and anomalies in NPA's current tariff structure. In additionto measures recently taken, the mission recommends that NPA should com-plete a tariff study to design a more logical tariff structure that wouldhelp to meet NPA's financial, objectives, reduce the existing anomaliesand distortions, and make suggestions on how tariffs should be changedduring a possible transition to a hydro-based system.

Long-Term Issues

28. For the long run, the focus of the report is on the efficientdevelopment of energy resources to meet the growing demands for differenttypes of energy in the !conomy beyond the turn of the century. The longterm issues relate to )ptions for meeting future power requirements, thedisposition of the refit,ory and fuelwood supplies.

Options for Meeting Future Electricity Demand

29. There are two aspects of the long-run power issue. The firstconcerns the viability of the Bumbuna hydroelectric scheme in relation toother options to meet future demand in the Western Area. The secondrelates to development options for isolated provincial centers.

30. Western Area. For meeting future demand for the Western Area,there are a number of options open to Sierra Leone. These includealternative hydroelectric schemes as well as the possibility of a thermalsystem based either on coal or oil located at Freetown. The hydro-electric schemes which are technically viable include a 180 MW plant onthe Mano River and several versions of the Bumbuna scheme on the Seli

x

River. An evaluation of these options, to meet future demand to the year2020, suggests the following two general conclusions:

(a) The rehabilitation of Kingtom and Falconbridge plants shouldprovide sufficient capacity to meet demand in the Western Areawell into the 1990s. The chances for an earlier commissioningof new generating facilitivas would rise if the older (MAN)units at Kingtom cannot be restored to full service.

(b) A reduced form of the Bumbuna scheme (followed by a purethermal development) with an installed capacity of 47 MW is theleast cost solution within the set of thermal and hydro optionsexamined, over a wide range of load forecast and oil priceassumptions. This development will also allow diversific,tionof the country's energy supplies and provide some insuranceagainst oil supply disruptions. The-e may, however, be someroom for improvement in the design and sequencing of theproject, which as currently envisaged by the consultants is notoptimal.

A preliminary estimate of the balance of payments impact of theReduced Bumbuna scheme suggests that the outflows for debtservicing will be partially offset by the gains from thedecline in oil imports due to the use of the hydroelectricscheme. The results show that over the life of a 12 year loan(at a 10% interest rate) the Reduced Bumbuna scheme will leadto greater net outflows than the pure thermal scheme, but thelevel of excess outflows is relatively small--on average of $1-2 million per annum. Beyond the loan repayment period, theinvestment will save between $5-10 million--depending upon oilprices--per year in foreign exchange through the reduction inoil imports. The balance of payments impact will be morefavorable to Sierra Leone if it can obtain better terms forfinancing the investment than has been assumed in the analysis.

While the reduced Bumbuna scheme will not add significantly todebt servicing compared to thermal alternatives, initialfinancing of such a lumpy investment could create problems,given the constraints on foreign exchange resources (includingborrowing) over the next five years. However, financingconstraints by themselves shuuld not be a sufficient rationalefor cancelling or significantly delaying the project if it iseconomically and technically sound. The financing aspects ofthe problem need to be looked at more carefully including:(i) the economic rate of return on the project relative tothose on other investments which also have claims on foreignexchange resources; (ii) the magnitude of suppliers creditavailable for the project (which would represent additionalresource), a ' (iii) options available to the Government forbetter management of the financial problems caused by theinvestment in Bumbuna.

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31. Provincial systems. There are a number of mini hydro schemes,identified in recent studies, which could meet a high proportion of ther.ining sector demand with consequent savings in fuel imports. The via-bility of these schemes has not been fully studied, but two schemes,Singimi Falls (7.2 MW) and Benkongor Falls (10.8 MW), merit furtherevaluation. Initial assessment of the schemes, which are not run of theriver, suggests that they will yield high economic returns.

32. There are a number of possibilities for interconnect;ngisolat'2d power systems. These should be carried out if economic.However, a policy should be identified for future interconnections toprevent haphazard development and to ensure that the design meetsnational standards.

33. Main recommendation. NPA should attempt to resolve a number ofunanswered questions before making a final decision on the Bumbuna schemeand the development pian for the Provincial Systems. Among other things,NPA should (a) review the design, sequencing, and financing of thereduced Bumbuna project; (b) investigate the prospects of exportingsurplus energy from Bumbuna to Guinea; (c) evaluate the viability andoptimum sequence of development of the more promising mini hydro schemes;and (d) define technical standards to be adopted in interconnectingisolated Provincial Systems.

The Economics of Refinery Operations

34. The refinery, run entirely by Sierra Leone nationals, isoperationally and managerially sound even though it is suff-ring fromcrude shortages, attendant shutdown and start up of operations, and istechnically bankrupt from assuming the cumulative interest on theGovernment crude debt to the oil companies. There is a case forretaining the refinery as an operating entity. Based on current andprojected long term crude and product prices, it is marginally viable;however, it also constitutes a center of managerial and technicalexcellence in Sierra Leone, a hydrocarbons testing laboratory, andprovides employment and training spin-offs.

35. At present, the refinery operates on a cost plus basisproviding little incentive for improving technical and economic effi-ciency or for exploiting market opportunities. As discussed in thesection on institutional reform, there is a need to make the refinerymore responsive to market conditions either directly through morecompetition, or indirectly through a pricing scheme which takes accountof conditions in international markets. Even if the refinery is economicon a long run basis there is no rationale for operating the refinery ifprice relationships (say through dumping of products) are such that thegross margin is negative (i.e., variable costs are not being covered).If these conditions persist for a significant period of time, it wouldmake sense to shut down the refinery's operations without firing thestaff. Such a policy would require close monitoring of the gross

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margin. By ensuring that the refinery does not operate when the grossmargin is negative, losses, if incurred, could be restricted to about thelevel of the refinery's fixed costs, $1.5 million. This policy is morelikely to be effective if the refinery is allowed to run as a commercialentity.

36. The main factors which support the refineries' viability are:(a) low operational cost due to reLatively efficient operations and theabsence of (expensive) expatriate staff; (b) freight advantage oftransporting crude relative to products due to Sierra Leone's location--the cost of transporting crude from Bonny in Nigeria (the usual source ofcrude supplies) is about half the cost of transporting products fromRotterdam, the base location for determining product prices, to Freetown;and (c) sunk capital costs of existing faczilities and the relativelymodest needs for future investment over the next 10 to 15 years. Therefinery's long term viability is assured as long as it is run effi-ciently, no major changes in refinery configuration are contemplated andSierra Leone continues to obtain crude at competitive terms from Nigeriarather than from a more distant source. As the refinery's economics arefinely balanced, a significant change in any one of the above threevariables, while unlikely, could make the refinery an uneconomic opera-tion and the Covernment should be aware of this sensitivity.

37. Although profits are likely to be modest, the refinery'sfinancial viability can be sustained as there are no major investmentrequirements anticipated over the foreseeable future. The start up ofthe Bumbuna scheme could reduce the refinery's profits by about$0.5 million but would not alter its economics significantly. Theselosses reflect the penalty to be paid on the sale of -urplus fuel oil atexport parity prices.

38. In terms of financial resuilts, the performance of the refineryhas been adversely affected in the recent past by (a) increased fuelconsumption and losses associated with frequent start up/shut down ofoperationis due to crude supply interruption, (b) delays in adjusting ex-refinery prices following increases in the Leone price of crude supplies,and (c) the continued inclusion of accrued interest on the Governmentdebt to the oil companies in the refinery accounts.

39. Main Recommendations

(a) The refinery should be retained as an operating unit. However,a least cost strategy should be implemented requiring theref'inery to operate only when variable costs are covered. Itslegal statutes and pricing policies should be reviewed toensure that it becomes more responsive to international marketconditions.

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(b) It should operate as a receiving terminal when prices makeoperations less attractive.

(c) The validity of charging accrued interest on oil company debtto the refinery's accounts should be teviewed.

Household Energy/Woodfuels Stratety

40. Estimates by the mission have confirmed the Government'sconcerns "hat risi:ig fuelwood costs are absorbing a significant propor-tion of the income of urban households (as much as an estimated 40 ofmonthly expenditures). In addition rising prices are a symptom ofgrowing regional shortages and deforestation near urban areas. Withoutsome measures for increasing supplies or reducing demand, especially inthe Peninsula Area as well as in the vicinity of Bo, Makeni, Koidu, andKenema, the cost of fuelwood supplies is expected to grow.

41. The most promising strategy fcr reducing woodfuel costs is theincreased use of improved stoves, whose efficiencies are about twice ashigh as conventional woodstoves currently available in the market. Thesestoves, which would be locally manufactured, could reduce wood demand by40-60% while incurring modest investment costs on the part of the con-sumer. A program of demand management centered on the utilization ofimproved stoves should be initiated. No expenditures should be requiredfrom the Government other than those for coordinating, testing, andpromoting private production and marketing of improved stoves. As thestoves are made from locally available scrap metal, there should also beno drain on foreign exchange resources.

42. Supply side measures should atso be initiated as part of aninteg.-ated approach to provide household energy at least cost. However,there are a number of problems associated with supply side measuresinvolving new fuelwood plantations. These include: (a) uncertaintyabout costs and competitiveness of the wood from these plantations;(b) resource constraint faced by the Forestry Services who will implementthese measures; and (c) uncertainty about the link between demand growthand deforestation. The mission recommends that the Government reviewplans for fuelwood plantations. Lower cost options should be examined,including agroforestry. Investments in the next few years should belimited to a few demonstration plantations for obtaining better infor-mation on yields and costs under different modes of management.

43. A higher priority on the supply side than plantations should begiven to better utilization and management of existing resources. Such aprogram could include the following components: (a) studying the poten-tial for increasing supplies from mangrcves and bush fallow agriculture,(b) natural forest protection, and (c) reviewing possibilities for bettercontrolling supplies to urban areas, for example through, city gate

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cAlIection of taxes, building of feeder roads to surplus areas, andincreasing the efficiency of traditional charcoaling techniques.

Investment Priorities

44. The following projects should receive the highest priority inthe public sector investment budget for the period 1987-1991:

Power:

(a) Rehabilitation of Kingtom and Falconbridge power plants($6.5 million).

(b) Strengthening of transmission and distribution networks in theWestern Area to meet expected load growth followingrehabil.tation of power plants ($3.3 million).

(c) Completion of Bo/Kenema transmission liaik ($1.8 million).

(d) Improvements to Provincial Systems, including spare iarts andcommunications ($3 million).

(e) Projects defined by priority investigations listed below undertechnical assistance.

Petroleuim:

There are no major petroleum investments to be financed by thepublic sector. A small amount of investment ($1.0 million) will berequired for the Government's share of building security stock ofcrude oil to 30 days of consumption (about 20,000 tons). (Another$0.55 million of public investments may be required for establishingretail outlets for kerosene and diesel in the rural areas and forthe Government share of investments in ernergy efficiencyimprovements at the refinery, if these investments are consideredviable.)

Woodfuels/Household Energ:

Demonstration fuelwood plantations ($1 million).

Deferred Investments

45. The following projects should be deferred and reviewedsubsequent to other recommended action.

(a) Major new generation and transmission projects pendingcompletion of Master Plan Study and review of the viability ofrehabilitating existing generating plant.

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(b) Heavy fuel generating plant investment ($7 million) planned forBo, under assistance from Danida, pending review of theviability of the scheme.

(c) Major fuelwood plantation investments pending completion of areview of the viability of such schemes based otn the experienceof ongoing and proposed demonstration projects.

IPriority Investigations and Technical Assistance

46. The following investigations and technical assistance should beinitiated during 1986/87.

Power:

(a) Consultancy services for evaluatin,g details of planned.ehabilitation, including repairs to MAN units, andimprovements needed in management practices and financialcontrol at. NPA ($0.1 million).

(b) Various studies incltuding those related to the Bumbuna scheme,mini hydro sites, and tariffs ($0.2 million).

(c) Power loss reduction study ($0.1 million).

Petroleum:

(a) Review of petroleum pricing structure and associated supplystrategy ($50,000).

(b) Design and development of accounting and information systems atthe DTI for monitoring and regulating domestic market($200,000).

(c) Exploration promotion or! offshore relinquishments ($0.5-1.5 million).

(d) Evaluation cf the viability of (i) establishing retail outletsin rural areas to be operated by cooperative/local groups, and(ii) investing in energy efficiency improvements at therefinery ($50,000).

Fuelwood:

(a) Preparation of a program for testing and promoting privateproduction and marketing of improved stoves for householdcooking ($600,000).

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(b) Strengthening of forestry department in areas of agroforestryand extension services as well as in the setting up of anImproved Stove Unit in the MEP for coordinating a program forimproved stoves ($500,000).

(c) Technical assistance (from donors) to eialuate the scope andbenefits of establishing regulatory control over the supply ofwoodfuels to urban areas and improving the efficiency ofcharcoal production ($50,000).

Energy Sector:

(a) Provision of technical assistance to MEP for advising on andimplementing improved energy sector coordination and planning($200,000).

47. While all the recommendations merit prompt consideration,perhaps the most important of these concern the need for technicalassistance to increase Sierra Leone's capacity for developing andimplementing a strategy for meeting its future energy needs.

I. ENERGY AND THE ECONOMY

The Economy

1.1 Sierra Leone is a relatively small (72,000 km2) tropicalcountry along the West African coast. It has a population of 3.7 millionpeople with v per capita income in 198" of US$330 and low levels ofsocial development: life expectancy is only 38 years, with infantmortality at 20%, 88% of the population has no access to safe water andabout 80% of the adults are illiterate.

1.2 The country has good agricultural, marine, mineral, and hydro-power potential but is one of the least developed countries in theworld. GDP grew by about 4.3% per year in the 1960s but at an averagerate of only 1.9% between 1973 and 1983. With the population growing byabout 2.5% annually, real per capita income was declining over the latterperiod.

1.3 The sectoral composition of GDP in 1984/85 is estimated at 35%agriculture, 20% transport and communication, 11% trade and tourism, 10%mining and quarrying, 6% manufacturing and handicrafts, and 18% otherservices. Foreign exchange is earned mainly by exporting minerals(i.e., diamonds, bauxite, rutile, gold, iron ore). Mineral exports haveaccounted for about 70% of export earnings in the 1980s.

1.4 The sluggish growth of GDP experienced in the 1970s, togetherwith a declining trend in per capita income, has continued with anaverage annual rate of 2.1% from 1979/80 to 1984/85. Underlying the poorperformance of the economy in the past 15 years are two distincttrends. The first is a cyclical one caused by declining export earnings,in turn the result of fluctuations in commodity prices and the wor.deconomy. The second is a secular trend marked by the gradual depletionof Sierra Leone's major mineral resources of alluvial diamond and ironore. In recent years the recorded production of diamonds, by far themost important source of foreign exchange, has fallen to less than one-tenth its level of a decade ago, while the production of iron ore ceasedaltogether in 1976 and was resumed for only two years on a smaller scalein 1982. Exports of other commodities have not yet substituted for thisdecline.

External Trade Gap

1.5 The Government has not successfully adjusted to either of theadverse trends. With increasing imports and escalation of oil prices,the trade balance deteriorated in the late 1970s and early 1980s.External funds borrowed to finance the rising trade and current accountdeficits accumulated into a public debt of over $400 million, equivalentto 27% of GDP, by end of fiscal year 1983. While the size of the trade

gap has diminished since 1983, the overall balance of payments positionhas remained under pressure: ir spite of a 20% improvement in exportsduring FY85, scheduled debt service payments in that year accounted for25% of !xport earnings, the current account deficit was $87 million,about 6% of GDP, and external arrears had increased to $285 millior, morethan double the level of exports. In conjunction with mounting arrearsand a rising debt service burden, most of Sierra Leone's foreign exchangeearnings have, for a few years, been flowing outside the banking systemthrough the "parallel" market where the exchange rate has been muchhigher than the official rate. The combined effect of these developmentshas beeli an acute shortage of foreign exchange at the disposal of theGovernment.

Recent Developments

1.6 By the time of the mission in February 1986, the economic andfinancial situation had become precarious, with a deteriorating balanceof payments, a thriving parallel market in foreign exchange, wideningbudget deficit, and inflation accelerating to a level in excess of 100%per annum. To recover from this economic crisis, the Government, onJune 27, 1986, announced a bold package of reforms as part of its FY87budget. The major elements of this program are: (E) a flexible exchangerate; (b) the removal of all subsid;es on petroleum and rice; (c) a moreliberalized trading regime with almost all commodities freely importable;(d) substantial increases in the producer prices of major export crops;(e) removal of controls on the prices of all commodities except monopolypublic utilities; and (f) structural adjustment changes to be implementedin the areas of public sector management, allocation of public expendi-tures, agricuitural policy, and industrial incentives. These reforms,still in various stg,ges of implementation, are consistent with theGovernment's dialogue with the International Monetary Fund (IIMF) and theWorld Bank.

1.7 The macroeconomic environment, which is still adjusting to thesharp changes in policy, shows no sign of stabilizing as uncertaintypersists regarding the Government's resolve to fully implement announcedreforms. A stand-by agreement reached with the IMF, and approved by itsBoard in November 1986, collapsed soon afterwards as agreed targets onbudget deficits and credit ceilings could not be met. The collapse ofthe stand-by arrangement with the IMF has coincided with a worsening ofthe economic situation: shortages of petroleum products have increased,inflation has accelerated sharply, reaching the 150% per annum rate inthe last six months of 1986, and the currency has depreciated rapidly.The official exchange rate was fluctuating in the Le 45-55/$ range inMarch/April 1987 compared with Le 5.10/$ at the time of the mission, oneyear earlier. A major factor underlying the rapid depreciation of theLeone has been excessive money creation to fund the increasing fiscaldeficit; the basic problem is that too many Leones have been chasing toofew dollars. At the same time, the amount of foreign exchange surren-dered to the banking system has declined due to uncertaintysurrounding the implementation of the IMF program, thereby adding

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pressures on the Leon;..

1.8 More recent discussions, held during March 1987, between theGovernment, the Bank, and the IMF, have led to the definition of a"shadow" program outlining new short term targets for fiscal deficits,credit creation, and the removal of subsidies on rice and petroleumproducts. Sierra Leone's performance under the "shadow" program willprovide a vital test of the Government's commitment to economic reform; asuccessful implementation of the program is expected to pave the way fora new stand-by agreement with the IMF and a structural adjustment loan(SAL) from the Bank during FY1987-88.

Economic Scenarios for Sierra Leone

1.9 In evaluating the issues in the energy sector and the implica-tion of different options, two scenarios--alternative views of what theworld would look like in the future--have been devel. ped. The keydifference between the scenarios relates to the timing and extent of theadoption in Sierra Leone of the economic reforms being currentlydiscussed with the IMF and the Bank. It may be mentioned that on severaloccasions in the past the Go-vernment, for domestic reasons, has beenunable to follow through on prior agreements with the Bank and theFund. Hence the two scenarios would remain valid even if currentdiscussions lead to a signed agreement.

1.10 In one scenario--Accelerated Growth (AG)--the proposed reforms(including significant increases in the prices of products to bring themin line with economic costs) are implemented to a large extent, if notcompletely, over the next two years, paving the way for significantcapitai inflows to the country. In the second scenario-- Base Case (BC)--the reforms are implemented in a very limited way and they come toolate--late 1980s or early 1990s--leading to prolonged economicstagnation.

1.11 The external environment, including oil prices, is assumed tobe the same in both scenarios, excep: for the analysis of the powerexpansion plan where two oil price profiles are proposed for eachscenario. In effect, therefore, there will be four swenarios for theevaluation of power expansion options including the Bumbuna scheme.

1.12 Details of these scenarios are give-i in Annex 1 both in termsof qualitative descriptions and quantitative values. Table 1.1summarizes the GDP and oil price assumptions underlying the twoscenarios.

Table 1.1: SCENARIOS (SUMMARY)

1986-90 1990-95 1095-2000

GOP Growth (% p.a.)

Base Case (BC) 0 2 2-3Accelerated Growth (AG) 3 5-6 4-5

1986 1990 1995 2000

Base oil prices a/ (S/barrel)

Current prices 20 23 39 48

Constant 1986 prices 20 18 25 25

Alternative oil prices b/ (S/barrel)

Current prices 10 13 30 40Constant 1986 prices 10 10 19 21

a/ Prices common to both scenarios.

b/ Alternative profile used for evaluating sensitivity of power expansion plans to oil

prices.Source: Bank projections, mission estimates.

Energy-Economy Interactions

1.13 Economic activity and energy sector developments have been

caught in a downward spiral. Economic stagnation, together with balance

of payments problems, have curtailed the demand and supply of energy. At

the same time shortages in energy, as well as the oil price shocks of the

70s, have disrupted economic activity. Energy-economy interactions aremost apparent in considering the constraint posed by the balance of pay-

ments. Lack of foreign exchange has reduced petroleum imports, disloca-

ted transportation, and limited the operation of petroleum based elec-trical power plants. Furthermore, shortages of imported spare parts have

restricted essential maintenance, increasing energy losses and reducing

operating capacity; "firm" electrical generating capacity has less thanhalved in the previous three years. In turn, the heavy claims of petro-

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leum imports on foreign exchange--these increased from 8% of exportearnings in 1972 to over 50% in 1982--(among the highest share as com-pared to neighboring oil importing countries) has constrained non-oilimports and acted as a drag on the economy. 1/ Once the economy recoversfrom its current malaise, a central issue is whether and how it will meetits growing energy requirement under the prevailing balance of paymentsconstraint.

Table 1.2: PETROLEUM IMPORTS AND EXTERNAL. TRADE(million current Leones)

1980 1981 1982 1983 1984 1985

Exports 224.1 176.9 136,6 201.8 331.0 627.7

Crude Oil Imports 67.3 91.4 61,3 88.1 153,1 166.1Petroleum Product imports 4.9 6.3 21.2 4.2 5.4 0.0 a/Petroleum Exports andBunker Sales 14.6 18.5 10.0 18.7 19.8 29.0 a/

Net Petroleum Imports 57.6 79.2 72.5 73.6 138.7 137.1

Net Exports (1) - (4) 209.5 158.4 126.6 183.1 311.2 598.7

Petroleum imports as % ofNet Exports (5) * (6) 27.5% 50.0% 57.3% 40.2% 44.6% 23.5%

Imports Financed from Outsidethe Banking System 227.5 194.8 277,4 9.8 152.0 466.8

Adjusted Exports b/(6) + (8) 437.0 353.2 404.0 192,8 463.2 1075.5

"True,, Ratio of oilimports to exports (5) - (9) 13.2% 22.4% 17.9% 38.2% 29.9% 12.7%

a/ Exciudes values of fuel oil exported in exchange for importation of gasoHine.b/ Assuming imports financed outside Banking system are equal to the total export

earnings retention in the same year.

Source: Bank of Sierra Leone, IMF statistics, mission estimates.

1/ It is important to note that if the official exports are adjustedfor unofficial earnings through the "parallel" market, then theproportion of foreign exchange earnings claimed by petroleum importsis reduced (see estimate in Table 1.2). The burden is neverthelessstill significant.

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Key Energy Issues

1.14 An overview of total and sectoral energy consumption in Siert;Leone is presented in the 1984 energy balance (Annex 2). Primary energysupply was about 1.2 million (toe) in 1984, or 310 kilograms of oilequivalent (kgoe) per capita, which is about average for countries withsimilar income and among the lowest levels in the world. About 80% ofprimary energy supplies were provided by domestic biomass energy in theform of fuelwood. The remaining 20% of primary energy requirements aremet by imported crude oil and its products, of which about 30% are usedis Sierra Leone's existing thermal-only power generation system. Thesemajor sources of primary energy, fuelwood and petroleum imports, are bothassociated with supply and financing problems which have seriousconsequences for the economy as a whole.

1.15 There is evidence of increasing fuelwood shortages near theurban centers combined with a deterioration in the size and the quality,f forest resources. The long term environmental effects of the deple-tor of forest cover and overcutting are difficult to estimate and couldbe significant. However, the more direct and obvious problem is thesteadily rising costs of fuelwood consumption: as revealed by surveyscarried out by the mission, shortages .n urban areas have led to largereal term increases iii the price of fuelwood over the past few years andfuelwood consumption now absorbs a relatively high proportion of house-hold income (see Chapter IV). The situation is particularly worrisome inthe Peninsula Area, as well as in the vicinity of the towns of Bo,Makeni, Koidu, and Kenema.

1.16 Yet, in spite of the urgency of corrective action, investmentsin the forestry sector have been minimal so far, Less than 2% of extern-ally financed investment, which accounts for around 75% of all fixedcapital investments in Sierra Leone, was allocated to projects forafforestation and charcoal production during 1981-84. Over the sameperiod, the electricity subsector, which represents only 2% of finalenergy demand, received over five times as much financing as the forestrysubsector. While the importance of electricity to the economy is likelyto be much greater than that revealed by its share in final encrgyconsumption (in part because the end-use efficiency of using electricityis five to six times higher than that for traditionaL fuels), there is aneed for the Government to review the composition of energy sectorinvestments in general and the allocation to forestry and fuelwoodrelated investments in partic lar.

1.17 Imported petroleum products are the only source of primaryenergy supply to the modern sector other than a limited amount of char-coal and fuelwood used by industry. As discussed above, petroleum im-ports are placing a significant burden on the balance of payments and the

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Government has been restricting imports since the early 1980s. Despitethese restrictions, the proportion of foreign exchange absorbed by oilimports has exceeded 40% since 1981, except for 1985 when the sharedropped to 23%, largely due to a 40% cutback in the volume of netpetroleum imports. The resulting disruption to the economy from the lackof fuel has been severe, especially in rural areas.

1.18 There are three issues which require the immediate attention ofthe Government. The first one relates to the existing shortages in thesupply of electricity and petroleum products, and the supply and demandside measures that should be undertaken to alleviate them. The secondone involves weaknesses in the coordination and management of the govern-ment ministries and parastatal agencies dealing with energy. Theseweaknesses represent a major obstacle to the efficient and reliablesupply of energy and exacerbate the disruptions caused to the economyfrom supply shortages when and as these have occurred. There is a needfor the Government to evaluate options for making these agencies moreeffective. The third short-term problem relates to distortions in energypricing which, as described in later sections of the report, have contri-buted to financial problems for the Government, the power utility, andthe refinery and have led to inefficient choice of fuels by consumers.Policy changes to remove these distortions and alleviate concomitantproblems should be urgently evaluated.

1.19 There are three long-term issues which focus on the developmentof the energy sector over the next 10 to 15 years. First, the optimallong-term strategy for developing the power sector must be determined.Within this context, the need for investment in hydroelectric schemesover the next 10 years should be assessed. Here the advantages ofreduced dependence on imported oil have to be balanced against theincrease in the economy's financial burden which the large and lumpyinvestment in hydro-schemes implies. Second, the economics of therefinery need to be examined, since it may under specific circumstancesbe cheaper to import products directly. Third, fuelwood supply at thenational and local levels should be studied to determine if there are anyimpending shortages of this resource and what can be done, in terms ofboth an investment program and policy initiatives, to improve fuelwoodsupplies and reduce household energy costs through more efficient use ofthe resource.

Energy Consumption Patterns

1.20 An overview of present and future energy consumption patternsis provided by the energy balance for 1984 as well as projections for

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1995, by scenario (see Annex 2). The implication of these balances foralternative policies is discussed below. 2/

1.21 Balances for 1984. Final energy consumption patterns based onthe 1984 energy balance are presented in Table 1.3 below. Final energyconsumption by sector is dominated by the residential sector (includinghome based craft activities). Households consume 86% of net domesticenergy supplies, while Lhe balance is divided up between transport (6%),industry (5%), mining (2%), and agriculture (1%). This distributionreflects the dominant role of traditional energy, mainly fuelwood. Thisis used, as already discussed, almost exclusively by households forcooking and craft activities, and generally with very low combustionefficiencies. The same comment applies to the use of charcoal.

rable 1.3 STRUCTURE OF FINAL ENERGY CONSUMPTION (1984)

(%)

Sector Fueiwood Charcoal Petroleum Power Total

Agriculture - - 6 - I

Mining - - 6 38 2

Industry 3 10 15 40 5Transport - - 49 - 6

Households 97 90 24 22 86

100 100 100 100 100

735 39 118 19 911

('000 TOE)

Source: Mission estimates.

1.22 The sectoral distribution of final consumption of importedenergy presents a totally different picture. Transport is the majorconsumer of petroleum products, accounting for 49%, followed byhouseholds (24%), industry (15%), and agriculture and mining 6% each.

2/ Annex 2 also provides an energy balance for 1975 for referencepurposes. Household energy use figures for 1975 are based on theassumption that the consumption per capita was the same as estimatedfor 1984.

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This distribution reflects the low level of industrialization in SierraLeone and the insignificant use of petroleum products currently used byhouseholds for cooking and lighting.

1.23 Industry (including commercial enterprises) stands out as thebiggest electricity consumer with 40% of sales, while mines and house-holds consume 38% and 22% respectively. In energy terms the modernindustrial sector in Sierra Leone consumes almosc the same amount offuelwood and charcoal, totaling 26,000 toe, as it does of electricity andpetroleum combined (although the delivered energy in the case of fuelwoodis much lower because of conversion losses).

Consumption Patterns Under Alternative Scenarios

1.24 Final energy consumption patterns for 1995 under the AG and BCscenarios are presented in Tables 1.4 and 1.5.

1.25 Under an AG world, the net effects of a restructured economy,significant and feasible improvements in the efficiency of energy use,and the commissioring of the Reduced Bumbuma scheme are reflected in theenergy balance for 1995. Comparing Tables 1.3 and 1.4, the consumptionpattern is still dominated by household energy. However, there is someshift toward transportation and industry, whose share in total finalenergy consumption goes up from 5% and 6% respective'Ly in 1986 to 8% in1995. This limited increase in the share of economically active sectors,in spite of fairly rapid growth, reflects both the large weight of tradi-tional energy in current consumption and the emphasis in governmentpolicy under AG for growth based on expansion of agriculture rather thanindustry which is more energy intensive. The sectoral distribution ofimported petroleum products also signals the emphasis on agriculture; theshare of petroleum products consumed by agriculture increases from 6%to 8%.

Table 1.4: FINAL ENERGY CONSUMPTION, 1995,ACCELERATED GROWTH SCENARIO

(S)

Sector Fuelwood Charcoal Petroleum Power Total

Agriculture - - 8 - 1Mining - - 7 20 2

Industry 2 8 18 50 8Transport - - 47 - 8

Hoiseholds 98 92 19 30 82100 100 100 100 100

('000 TOE) 895 51 198 31 1174


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1.26 Industry, however, continues to be the biggest consumer ofelectrical power with 50% of sales. The share of the mining sectordeclines significantly from 38% in 1984 to 20% due to a reduction inmining activity. Households increase their share of power to 30% partlybecause of steadily rising incomes.

1.27 In spite of GDP growth in the 4-5% range, total energyconsumption rises only at a modest rate of 2.4% p.a. from 911,000 toe to1,174,000 toe. This largely reflects the slow rate of growth in fuelwooddemand (1.8% p.a.); the rate of growth of fuelwood consumption is tem-pered by the use of more efficient stoves by a significant proportion ofthe population, as discussed in Chapter IV.

1.28 When comparing fuel energy consumption under AG with BC (asgiven in Table 1.5) the advantages of a restructured economy, and themore efficient use of resources becomes even more apparent. In spite ofstagnating economic activity (with GDP growth rates averaging 1% p.a.),total energy consumption averages a growth rate of 2.1% p.a. comparedwith 2.4% under AG. In the case of commercial energy (power pluspetroleum) the growth rate under BC is 2% p.a. (with an average CDPgrowth rate of 1% p.a.) compared with 5% under AG (with an average CDPgrowth rate of 4.5% p.a.). If the same ratio between GDP and energyconsumption growth had been maintained in AC as in BC, then commercialenergy consumption would have increased at a 9% p.a. rate: instead ofdoubling, the estimated consumption of imported petroleum products (andof electrical power) would have increased three-fold between 1984 and1995. The effect of policies in AC have significantly lowered the levelof energy consumption under that scenario, with attendant effects on fuelimports.

Table 1.5 FINAL ENERGY CONSUMPTION, 1995BASE CASE SCENARIO

(X)

Sector Fuelwood Charcoal Petroleum Power Total

Agriculture 6 - %

Mining - 8 25 2Industry 1 6 20 44 6Transport - - 46 - 6

Households 99 94 20 31 87100 100 100 100 100

('000 TOE) 929 50 148 21 1,147

Source; Mission estimates.

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Energy Resource Base

1.29 Sierra Leone is reasonably well endowed with energyresources. Its main domestic energy resources are woodfuels and thepotential for hydroelectric power. Fuelwood is by far the largest singledomestic source of energy in use.

1.30 Anual supply of fuelwood is currently estimated at around4 million m , 10% of which goes to Freetown. High forests which oncecovered most of Sierra Leone have been reduced to 4% of the land areathrough shifting cultivation, commercial logging and cutting forfuelwood. Most of the country is now covered with secondary forests invarious stages of degradation, or derived savannah. As fuelwood isobtained from both primary and secondary forests, the reduction in thesize of the former does not on its own give a complete picture of theavailable supply of fuelwood. Reforestation programs have yet to beimplemented in any significant way. The issue of future supplies andlikely scarcities of fuelwood, both at the regional and national level,is discussed in greate.r detail in Chapter IV.

1.31 There is a large, and virtually untapped, hydroelectric powerpotential conservatively estimated at about 1200 MW. Technically andeconomically the most promising site is at Bumbuna with an ultimatepotential of 305 MW installed capacity and 1460 GWh of electricity gene-ration. (This compares with existing installed capacity of 134 MW, 98%of which is oil fueled 3/ and a total output in 1984 of 194 GWh.) Afterinitial work, as part of a staged development of the Bumbuna project,further investment has been deferred awaitinig an improvement in economicconditions. Around 20 mini-hydro sites have also been identified forserving isolated load c-enters but their feasibility has not yet beenfully evaluated. The only development so far has been a mini-hydro plant(4 MW capacity) on the Goma river which is being built with Chinesehelp. The viability of, and steps needed for, developing Sierra Leone'shydroelectric potential are considered in detail in Chapter III.

1.32 As yet no crude oil has been discovered in Sierra Leonealthough an oil company, Amoco, is currently involved in offshoredrilling. There is a potential for petroleum offshore but limitedexploration activity has prevented an evaluation of this potential.

1.33 There are other domestic energy resources which could providesignificant levels of energy inputs in the future, yet their viabilityhas not been examined. These include: crop residues and solar energyfor uses such as fish and crop drying where they could substitute fordiesel and kerosene; alcohol from biomass such as cassava or molasses,

3/ A seasonal hydro-site exists in the Goma Valley with an installedcapacity of 2.4 M. However, it has been out of operation since1983.

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which can be used as a gasoline extender or for industrial purposes;lignite deposits, whose size and quality has not been properly surveyedsince their identification in the 1920s, and which could substitute foroil in power generation and as a supplement/substitute for fuelwood inthe household sectors. The potential for developing other energyresources is evaluated in Chapter IV.

Institutional Framework

1.34 A number of ministries are directly responsible for energysector functions. The MEP is responsible for coordinating all energyrelated activities. It also establishes and implements policy in thepower subsector, including the supervision of the NPA, the electricalpower utility. The importation, refining, and distribution of petroleumproducts is regulated by the MTI, while exploration activities forpetroleum (as well as for lignite) fall within the jurisdiction of theMinistry of Miies (MOM). The Ministry of Finance (MOF) has institutionalresponsibility for allocating foreign exchange for oil imports. The sameministry sets petroleurn product prices in collaboration with the MTI.The manda'. for the management and development of forestry and otherwoodfuel resources rests with the Ministry of Agriculture, NaturalResources and Forestry (MANRF). There is no ministry with the legalmandate to develop, research, and promote the use of alternative energyresources such as solar energy or agricultural wastes. The focal pointfor studies and research in this area, as well as on improved stoves andmore efficient charcoaling techniques, has to date been the Fourah BayCollege of the University of Sierra Leone.

1.35 An important influence on some energy sector activities isexerted by ministries which do not have a direct responsibility for thesefunctions. This is particularly true of hydroelectric development andothier major additions to the power system, since these projects absorbsignificant resources. Their priority in the national economic plan isreviewed and established by the Ministry of Economic Planning and Na-tional Development. Coordination is required on these projects betweenthe MEP, NPA, and the planning ministry, as well as with a number ofspecial purpose authorities. Other ministries with linkages to theenergy sector include Transport and Communications, and Social We'lfare,the latter for its role in trial programs for the dissemination ofimproved stoves.

1.36 In the private and parastatal sectors the principal energytrading entities are (a) the oil companies in various wholly private orjoint vencure arrangements with the Government of Sierra Leone; (b) NPA,the state-owned power utility; and (c) the Sierra Leone Petroleum Re-fining Company, the parastatal which operates the refinery. Fuelwoodcutting, transport, and marketing are almost entirely in the hands ofsmall private operators. Over the past few years various Non-governmentOrganizations (NGOs), including YWCA, PLAN International, and Bois deFeu, have become involved in experimental, non-commercial, fuelwoodrelated programs both on the demand side (more efficient use of fuelwood)and the management of supplies (village tree plantings).

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II. PETROLEUM

Introduction

2.1 The modern sector of the Sierra Leone economy is highlydependent on imported petroleum products for its fuel and powerrequirements. In recent years the economy has been unable to obtainregular and adequate supplies of petroleum and the ensuing shortages haveadversely affected the performance of almost all sectors.

2.2 The immediate reason for inadequate supplies has been thecountry's difficult foreign exchange situation--a problem that is alreadybeing addressed at the macro level in discussions underway between theGovernment, the IMF, and the Bank. However, petroleum shortages, as wellas their consequences have been exacerbated by inefficiencies in procure-ment arrangements, price distortions, and the inability of the Governmentto manage the shortages. The first aim of this chapter is to focus oncomplementary micro level measures which will help to reduce shortages aswell as the cost of supplies. A second objective is to consider theoptions open to the Government in the longer term to reduce the country'sdependence on petroleum and encourage the supply of petroleum products atleast cost to the economy.

2 3 This chapter is composed of four sections. Section 1 providesa brief overview of the subsector describing recent developments insupply, demand, and organizational structure. Section 2 looks intoshort-term decision making in three separate areas: (a) supply procure-ment arrangements; (b) demand management; and (c) institutionalcoordination. In each area options are examined and recommendations madefor raising efficiency and improving the supply demand balance. Section3 evaluates components of a long term strategy for the subsector in-cluding: (a) the viability of the refinery; (b) measures for enhancingoffshore exploration; and (c) establishing a balance between public andprivate sector activities. Section 4 outlines an investment and tech-nical assistance program for the subsector.

Recent Developments and Subsector Organization

2.4 FoLlowing a 3% per annum growth rate during the 1970s, consump-tion of oil products has been on a declining trend sinGe 1979-80 (Table2.1). The decline in consumption mainly reflects restrictions on importsnecessitated by foreign exchange and procurement problems, rather thanthe effec,t of domestic price changes or the sluggish performance of theeconomy. 4/ Petroleum supply shortages reached their peak in 1985 when

4/ Domestic prices for products declined in real terms over 1980-85,and GDP is estimated to have grown at a 2.1% rate.

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net imports of crude and products were restricted to 132,000 tons, 38%below the 1984 level of 212,000 tons. Total product sales in 1985, about152,000 tons, were below the levels of a decade earlier arn represented aper capita annual consumption of 41 kilograms (kg), one of the lowest forWest African countries. The low level of consumption in 1985 helped tosave foreign exchange, with oil imports dec.ining in value from$55 million to $33 million, or from 42% to 21% of total exportearnings. However, the cutback led to the most serinliq shortfalls todate causing widespread load shedding, excessive service station queues,high black market premiums for petroleum products, and disruption oftrarnsportation and other economic activities. Approximate estimates ofsuppressed demand by the mission suggest that gasoline and kerosenepurchases by consumers in 1985 were about 45% below what they would be ifsales were unrestricted. These developments underscore the immediate needto improve the reliability of oil supplies and secure adequate foreignexchange for oil purchases.

Tjble 2.1: PETROLEUM SUBSECTOR--8ASIC DATA1'000 tons)

1980 1981 1982 1983 19e4 1985

Petroleum trading

Crude imports 222 224 160 181 236 158

Product imports 12 8 39 16 14 9

Product re-exports 51 63 33 46 38 55

Net imports 183 169 6'6 15 212 112

Ref in ngCrude processed 216 223 162 194 221 170

Product output:

L=PG I 1 1 1 1

Gasoline 29 29 25 29 35 30

Kerosene 43 44 30 40 41 25

Gasoil 73 77 56 62 78 59

Fuel oil 63 64 44 53 56 47

losses (i) 3.4 3,7 4.0 4.5 4.6 5.1

GrowthProduct sales Rate (%)

1980-85

LPG I 1 I 1 I 1 +2

Gasoline 41 39 38 34 38 34 -4

Kerosene 28 24 27 27 28 22 -4Gasoil 70 69 60 73 74 74 +1

Fuel oil 32 30 34 29 27 22 -3

Total 172 163 160 164 168 153 -8

Source: SLPRC, Marketing Companies; mission estimates.

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2.5 Products obtained from processing imported crude at the smallKissy refinery do not match the requirements of the 'ocal market. Tobalance refinery output with market requirements, surplus products havebeen exported and those in deficit imported. There has been a consistentand significant surplus of fuel oil (Table 2.1) which has either beenexported or sold as bunker fuel for use in ships. Other products areapproximately in balance but emergency imports have been increasinglyfrequent since 1982 as refinery operations have been disrupted by lack ofcrude supplies. One effect oF the refinery's intermittent operations hasbeen a steady increase in its fuel use and losses since 1981. The re-finery is operated by the SLPRC which was until recently owned 50% by theGovernment and 50% by British Petroleum (BP), Shell, Mcbil, and Texaco.In July 1985, however, the equity ownership of 10.2% held by BP wasbought by the Precious Metal Marketing Corporation, a private company, inwhich the Government holds a 35% share. In effect, the Government holdsmore Lhan a 50% share in SLPRC, which places the latter in the categoryof a parastatal.

2.6 At the time of the mission the management and administration ofstorage, transportation, distribtition, and retail marketing of petroleumproducts in Sierra Leone was handled by four marketing companies. Threeof these are subsidiaries of major oil companies--Shell, Mobil and Tex-aco--the fourth, National Petroleum (NP) is owned by the Government (60%)and private Sierra Leone interests. NP was formed from BP's marketingfacilities following the closure of the latter's operations in SierraLeone during 1985. Shell, Mobil, and Texaco each own product storage androad tanker loading facilities at Kissy. Looking at the positive side,there are no major operational, management and infrastructure problems inmarketing and distribution, which are independent of the foreign exchangeproblem. The physical system has not deteriorated significantly in spiteof limications on imported z-eres but this situation cannot be q'ustainedindefinitely without a drop in operational standards.

2.7 Turning to subsector management, there is no single institutionresponsible for the whole petroleum subsector. The institutional respon-sibility for oil imports, refining, and marketing rests with the MTI,with the Director of Trade and Industries (DTI) being the responsibleofficial. Exploration activities, on the other hand, fall within thejurisdiction of the MOM.

2.8 The responsibility for the setting of petroleum prices isshared jointly by the MTI and the MOF. The review and establishment ofboth ex-refinery and retail prices is carried out by a Price AdvisoryCommittee (PAC) which is composed of representatives from both MTI andMOF, as well as from the oil marketing companies and the refinery.

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Short Term Issues

Procurement

2.9 Procurement Arrangements. The DTI plays a lead role innegotiating terms fcr state-to-state crude procurement agreements.However, responsibility for implementation of the agreement, includingthe management of shipping and financia'L arrangements, was assigned to anagent--CEVIL Trading--at the time of the mission. This agent alsohandles the direct import of finished products to supplement therefinery's output, as well as the export of surplus fuel oil. Theinternational affiliates of the domestic oil marketing companies arepermitted to arrange certain direct imports, such as jet fuel forinternational bunkers and diesel oil for the large mining companies,payments for which are made in offshore dollars.

2.10 Prior to 1982, crude sales to the refinery were arranged on arotational hasis by the oil company sha-eholders under terms defined bythe Principal Agreement with the Government. The basic terms included90-day credit, a "commercially competitive f.o.b. price...having regardto sales by major crude oil purchasing companies to non-affiliatedbuyers," and freight rates which reflected market conditions at the timeof delivery. Compensation for crude deliveries was made by the refineryin Leones to the Bank of Sierra Leone which in turn converted them intodollars for payment to the creditors. Following exchange ratedifficulties in the early 1980s, the Bank if Sierra Leone stoppedconverting the Leones it was receiving from the refinery into dollars.By early 1982, overdue dollar payments exceeded US$40 million and thecompanies refused further crude deliveries except on a dollar cashbasis. No arrangement has yet been made for repayment of the debt, nowamounting to UCS58 million with interest, and crude supplies from thecompanies remain suspended.

2.11 In the meanwhile, the Government negotiated a state-to-statecontract with Nigeria for the supply of Bonny Light crude to SLPRC andarranged for a "third party," CEVIL, to handle shipment, scheduling, andfinancing of deliveries to FreeLown. Contractual details of thisarrangement were not made available to the assessment mission. However,it is known that in February 1986, the f.o.b. price paid by Sierra Leonewas equivalent to the Nigerian Government's Official Selling Price forterm contracts. Effective February 18, 1986, a "net-back" pricingarrangement has been used. Credit terms under the present arrangementrequire a cash payment in dollars for half the cargo at the time ofloading, and for the remaining half 180 days later.

2.12 The infrastructure for importing and exporting petroleumproducts is located at the main shipping port at Kissy, about four milesalong the coast from Freetown. The Kissy jetty can accommodate tankersup to 46,000 deadweight tons (DWT). There is sufficient flexibility inlines and connections to enable the off-loading of crude oil and all

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types of products (except LPG) to storage tanks located either at therefinery or the marketing company terminals. This flexibility alsoallows all grades of product for exports to be loaded into tankers fromrefinery or marketing company tankage.

2.13 In the past, crude shipments were delivered in monthly cargoesof about 20,000 tons. The shortage of 20,000 DWT tankers in the regionand lack of planning has necessitated part loading of larger vessels inthe 40,000-60,000 DWT range ith attendant dead freight charges. Toavoid these charges, the Government is making plans to switch to eightshipments per year, each of 30,000 tons, which the mission estimates tobe more economic. Existing storage capacity, about 40,000 tons of whichis assigned to crude oil and 140,000 tons to products, is adequate forhandling the proposed increase in the size of shipments. Somereassignment of storage between crude and products may, however, benecessary to accommodate security stocks, as discussed below.

2.14 Supply Costs and c.i.f/f.o.b. Margin. In Table 2.2 an annualcomparison has been made between the actual landed cost (c.i.f.) of thecrude and two alternative f.o.b. values--the official Nigerian GovernmentSelling Price (GSP) and average spot market values. This comparisonsuggests that margins were excessive both during the last two years ofthe deliveries under the Principal Agreement with the oil companies(1981-8') and over the period 1983-85 under the eximting contract withCEVIL Trading.

Table 2.2: SIFRRA LEONE CRUDE OIL IMPORTS

Average Yearly FOB CIF/FOB DifferentialYear Quantity Actual Landed cost GSP "SPOT" GSP "SPOT" ">

(Tons) (5'000) (S/bbl) (S/bbl) (S/bbl) (S/bb') (S/bbl)1977 188,139 21,059 15.15 14.39 14.20 0.77 0.951978 221,002 25,400 15.55 13.93 14.10 1.62 1.451979 234,601 40,640 23,25 20.87 31.66 2.38 (8.41)1980 221,794 64,170 39.15 36.30 37.67 2.85 1.481981 224,029 76,136 45.93 39.20 36.66 6.73 9.491982 159,881 49,496 41.44 35.60 33.50 5.84 7.941983 181,216 48,882 35.94 30.73 29.80 5.21 6.181984 235,705 60,894 34.42 29.69 28.8K 4.73 5.571985 158,008 40,274 33.96 28.59 27.8v 5.37 6.16

Note: Type of crude: Over this entire period, virtually all the imported crude has been Niger-ian. The only significant change is in the ratio of (Bonny) light to medium crudes:1974-78, 80% to 20%; 1979, 90% to 10%; 1980, 80% to 20%; 1981, 85% to 15%; 1982, 95% to5%; 1983-85, 100% light.


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2.15 Under the Principal Agreement with the oil companies the f.o.b.price was supposed to be a "commercially competitive" value representa-tive of third party sales. There is no exact measure of FOB third partysales prices. However, a comparison of actual landed cost with f.o.b.prices based on spot and GSP indicates the opportunity cost to SierraLeone of importing crude under the Agreement. Table 2.2 suggests thatthese costs were relatively reasonable over the 1977-1980 period. Thetanker market progressively tightened during these years and freightrates for the Bonny-Freetown voyage rose to $2.00/barrel. With mostdeliveries coming from Nigeria, c.i.f./f.o.b. differentials of about$2.50/barrel were not out of line with actual costs during that period.During 1981 and 1982, however, the landed cost per barrel was US$4-7higher than the f.o.b. opportunity costs. This excessive margin cannotbe attributed to either high freight rates or a tight oil market: whilestill relatively high, freight rates were not significantly above 1980levels and spot prices had fallen below GSP since crude was in plentifulsupply by then.

2.16 The margin for the crude landed under the state-to-statearrangement, 1983 through 1985, also appears excessive. The averagec.i.f./f.o.b. differential over the period was $5.06/barrel. An"iefficient" margin, including freight, insurance, crude losses, workingcapital costs, and a 3% commission for handling charges to CEVIL, wouldhave been at most $2.60/barrel. This implies that Sierra Leone paid an"'excess" margin of at least $2.40/barrel, amounting to approximately $10million over the three years.

2.17 Weaknesses of Current Procurement Arrangements and PossibleOptions. Despite the excessive margins paid for crude supplies overrecent years, deliveries have not always arrived when needed. Foreignexchange shortages, together with the absence of a budgeted allocation offunds for 'petroleum imports, have resulted in a scramble to findsufficient foreign exchange for each cargo. This has apparently involvedthe Ministry of Finance itself in parallel market dealings from time totime. Delays in crude arrivals have led to severe shortages of productsand undoubtedly escalated landed costs as vessels originally scheduledfor loading in Nigeria have had to be cancelled on occasion.

2.18 Most of the problems associated with procurement arise fromforeign exchange difficulties. Because of its inability to pay off thelarge outstanding debt of the oil companies, the Government's ability toobtain more competitive terms for oil supplies is compromised: thepresence of the debt limits the number of international crude supplierswhich the Government can approach for a supply contract. At the sametime there is room for improvement in the way the Government iscoordinating the activity. First, there is no system to allocate foreignexchange for purchasing oil supplies on an annual basis and then properlyprogramming this allocation to each *-hipment. Second, the use of anopen-ended contract at fixed terms with a single party, whether it isCEVIL Trading or an oil company, is non-competitive and invites monopolyrents.

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2.19 Options and Recommendations for Changing ProcurementArrangements. There are several options open to the Government for( repaying oil companies for past deliveries of crude; (b) developing asystem for programming available foreign exchange to match the timing ofpre-arranged shipments; and (c) improving the efficiency of procurementarrangements. A detailed study of these options cannot be undertakenhere. However, some comments can be made on each.

2.20 For repaying the oil companies, there are a number of optionsranging from repudiating the debt to immediate repayment. Somewhere inbetween lies the possibility of making arrangements to repay the debtover a long term horizon at concessionary interest rates, possibly in theform of a premium on the prices of future oil supplies. The Governmentshould attempt to resolve this problem as soon as possible through anegotiated rescheduling of debt repayments.

2.21 The appropriate system for programming foreign exchangerequirements to purchase crude depends on the state of the foreignexchange market. A totally free floating market, if it emerges, will notrequire any allocation system at all. However, if the market does notclear (i.e., shortages remain), or if the market is finely balanced suchthat the large payments (US$4-5 million) required for oil purchasescannot be easily accommodated, then the Government will have to find away to allocate the funds required to purchase shipments of 20,000 tonsabout once a month (or two shipments of 30,000 tons every quarter). TheGovernment should budget the requirement for funds within the constraintof foreign exchange availability and give suitable priority to petrolE nimports. An alternative approach would be to arrange a revolving creditfacility with a major commercial institution to support oil imports. Thetrade-off would be in the form of costs for arranging the facility.

2.22 Finally, there are a number of options open for improving theefficiency of procurement arrangements. The feasibility of these optionsdepends on the progress made in settling the oil company debt issue andthe future mode of refinery operations. Assuming that the Governmentshows its intention to solve the debt problem, and the present supplymode is continued, 5/ the main options are to: (a) maintain the currentstate-to-state agreement with Nigeria and implement the agreement with anagent like CEVIL, but review the formulae for the determining the CIF/FOBmargin; (b) invite international bids for crude supplies CIF Freetown;and (c) maintain the state-to-state agreement for Nigerian Bonny crudebut invite international bids for managing procurement arrangements. Themission recommends that the Government adopt the last option because:(i) Bonny crude is a good match with the country's market in terms ofboth quality and product yields (discussed in the refinery section);(b) its close proximity reduces freight charges; and (c) procedures for

5/ Crude procured for local refining with imports/exports ofdeficit / surplus products.

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regularly arranging and deciding on international bids would tax thecapacity of current institutional structure--delays in making decisionscould more than offset the advantages of such a procedure. It is diffi-cult to estimate the savings from each of these options. However, theanalysis above suggests that the CIF/FOB margin could comfortably bereduced from $5/barrel to about $2/barrel by introducing more competitionand negotiating deliveries in fully laden 30,00n ton DWT vessels. Asavings of $3/barrel would lead to annual savings of more than $5 millionfor crude imports of 236,000 tons at 1984 levels.

Demand Management and Pricing

2.23 In conjunction with measures to improve the supply of petroleumproducts, the problem of severe shortages should be addressed throughbetter demand management, primarily through pricing policies. The pricesof petroleum products in Sierra Leone are well below their opportunitycost to the economy, and the Government lacks a cohesive demand manage-ment policy. Both the level and structure of prices need to be reviewedimmediately to eliminate pricing distortions and reduce the subsidiesthat magnify the financial troubles of Government and subsectororganizations such as the refinery. Beyond this pricing review, theGovernment should reconsider the objectives and policy underlying theestablishment of ex-refinery and retail prices, particularly at this timeof uncertainty in international. oil markets.

2.24 Price Trends. A review of the time series of average annualretail prices of petroleum products between 1975 and 1985 (Annex 3)reveals that prices in real terms generally remained stable over the late1970s, but have declined significantly since 1980. In 1985, and aE.- thetime of the mission, real prices had fallen to about half of their 1975levels. To make a meaningful comparison of prices with neighboringcountries is difficult because most West African countries have adistorted price/exchange rate pattern. Senegal is an exception in thisregard, and Table 2.3 shows that pump prices in Sierra Leone were wellbelow those in Senegal during 1985, both at official and parallel ex-change rates.

Table 2.3: COMPARISON OF OFFICIAL RETAIL PRICES IN 1985

(USS/US Gallon)

Sierra Leone Senegal

at 5.4 Le/S at 10 Le/S(official rate) (parallel rate)

Gasoline 1.23 0.67 2.93Kerosene 0.62 0.33 1.99Gasoil 1.08 0.59 1.89


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2.25 Distortions in Ex-Refinery Prices. The official pricestructure existing at the time of the mission is outlined in Table 2.4.The single most important influence in the price structure is exerted byex-refinery prices. These are based on the landed cost of crude inLeones, anticipated operating costs, taxes, interest payments, andprofits for the ensuing twelve months. These costs are distributed on anImperial Gallon (IC) basis over the total expected volume output of therefiner for the same period. Product price differentiation is introducedto take account of political and commercial considerations, but with theproviso that the weighted average price structure should allow a completerecovery of the refinery's costs.

Table 2.4: S!ERRA LEONE OFFICIAL PETROLEUM PRODUCT PRICESAND ECONOMIC COSTS OF SUPPLY, 1985

Gasoline Kerosene Gasoil Fuel Oil Fuel oil to NPA

(Le/IG) (Le/IG) (Le/IG) (Le/IG) (Le/Long ton)

(1) Ex-Refinery Price 6,65 3.22 5.90 3.00 720.00(2) Duty 0.74 0,27 0.63 - -(3) Total Mktg Co Margin 0.46 0.36 0.32 0.34 81.29(4) Fr-eetown Area Transport a/ 0.05 0.05 0.05 0.04 8.71(5) Dealer Commission 0.10 0,10 0.10 - -(6) Sel ing Price, Freetown b/ 8.00 4.00 7.00 3.38 810.0(7) Economic cost of supply

in Freetown c/ 9.81 10,74 10,23 8.16 1860.0

a/ The transportation charge covers deliveries to service stations within a 20 mileradius; for trucking costs from main Kissy depot to up country locations there is anadditional levy equivalent to approximately Le 0.20/100 miles. In the case of fueloil tf;e charge is based on jetty and barge costs from Kissy to Kingtom station.

b/ Effective April 15, 1985.

c/ Estimated using the CIF costs of direct product imports (see Table 2.5) based on 3shadow exchange rate of Le IO/Si. To the c,i,f. costs has been added a terminallingcharge of $3/tonne and margins for marketing, transportation and distributionidentical to lines x, 4, and 5 in the table.

Source: SLPRC, Marketing Companies; mission estimates.

2.26 Table 2.5 compares official ex-refinery prices ill 1985 with thehypothetical cost of direct imports for the same year. Average WestEuropean spot prices are used as a starting point, to which are addedfreight and related charges. As shown, the structure of import parityprices was different from that of official ex-refinery prices: bothkerosene and fuel oil were being sold considerably below their oppor-tunity cost and, in effect, being subsidized by gasoline, whose price wasabout 20% above import parity. At the same time, ex-refinery keroseneprices were well below those for gasoil, as compared to import parityprices where the opposite situation existed. The need for cross subsi-

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dies should be carefully reviewed by the Government. Further, thedifferential between kerosene and gasoil should be eliminated; this isessential to prevent adulteration of gasoil by kerosene, especially inroad transport uses. The price structure is inefficient for tworeasons. Firstly, the cost-plus pricing arrangements means there is noincentive for the refinery to improve efficiency. Secondly, to theextent the refinery considers these product prices as given, its produc-tion decisions are based on artificial differentii.ls which are notconsistent with the country's opportunity costs.

2.27 The comparison in Table 2.5, based on official exchange rates,masks another important distortion: ex-refinery prices in Leones werewell below the economic cost to the country. It is estimated that theshadow exchange rate in 1985 was 10 Le/$. If import parity prices areconverted to Leones at that rate, ex-refinery products will be about halftheir economic costs. This distortion, which is due to an over valuedexchange rate, represented an explicit subsidy during 1985 since mostpurchases of crude in that year were financed by the Government throughparallel markec purchases of the dollar. Given that net imports in 1985were equivalent to $33 million, the subsidy paid by the Government to oilconsumers was approximately $10-15 million. The effect of subsidizingex-refinery prices is also reflected in retail prices. As shown in thelast line in Table 2.4, the economic costs of supply were well aboveretail. prices existing in 1985. These distortions have continued inspite of recently introduced changes in product prices as discussedbelow.

TatIe 2. 5: COMPARISON OF OFFICIAL 1985 EX-REFINERY PRICESWITH HYPOTHETICAL COSTS OF DIRECT IMPORTS

Gasoline Kerosene Gaso'I Fuel oil

Ex-Refinery Price Le/IG 6.65 3.22 5.90 3.00at official exchange rate, a! S/ton 376 164 284 126

Hypothetical 1985 13nded Cost

NW Europe SPOT 266 265 239 152Freight *ins,loss, S/ton 12 12 12 12Imp Duty*Turntax 10.0%, S/ton 28 28 25 6Terminalling, S/ton 3 3 3 3

rotal Landed Cost of Imports 309 308 279 183

Ex-refinery as a % import priceat official exchange rate 121% 53% 102% 69%

al Average official exchange rate during 1985 of 5.4 Le/dollar.

2.28 Tax Relativities. An important element of retail prices is thetax or government "duty" on petroleum products. The total "take" under

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the existing structure amounts to an average of 22% of c.i.f values onall light products (gasoline, kerosene, and gasoil). This breaks down asfollows: 8% import duty (on crude), 2% turnover tax on the refinery, 2%turnover tax on marketing, and a 10% duty in the price structure. Themore or less uniform 22% tax on light products is on the low side whencompared with values for several other West African countries (IvoryCoast, Senegal, Togo, Burkina, and Benin) as shown below:

Total Tax as a Percentage of CIFLow Average High

Gasoline 40 80 120Kerosene 0 20 40Gasoil 20 40 70

It is a general practice not to tax fuel oil (or gas oil) sold for powergeneration.

2.29 Revised Structure of Prices. An alternative structure ofprices is proposed in Table 2.6 based on a range of crude oil pricesvarying from $10 to $20 per barrel and an exchange rate of 48 Le/$, theaverage for March/April 1987. Ex-refinery prices are set by importprices (c.i.f.), which are derived from the two crude prices using theassumption that the product prices will allow a world scale refinery tobe economic. In essence, these prices represent LMRC to the country fortwo different prices of crude (See Annex 4). In practice spot prices forproducts will be different from these long run values but they stillshould fall within this range, as was the case in the first quarter of1986; at the time, c.i.f. prices per ton were, based on spot, $185 forgasoline, $228 for kerosene, $200 for gasoil, and $106 for fuel oil. Thetable suggests that large increases are required in the domestic pricesof all products. 6/ The table should be considered as indicative of theoptions for changes in product prices.

6/ Despite recent increases, official selling prices of petroleumproducts in Freetown during April/May 1987 (kerosene, 45 Le/IC;diesel, 47 Le/IG; and gasoline, 55 Le/IG) were still well below theupper end of the range estimated in Table 2.6; the upper end of therange is appropriate for comparison as crude oil prices weretouching $20/barrel in this period.

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Table 2.6: REVISED PETROLEUM PROOUCT PRICE STRUCTURE

World crude: S20,00/bblExchange rate: 48.00 Le/S

Gasoline Kerosene Ga3oil Fuel Oil to NPA

(Le/IG) (Le/IG) (Le/IG) (Le/IG)(Le/long ton)

CIF Freetown (S/ton) S/ton 233 236 215 119Le/tonne 11184 11328 10320 5712

Terminal Throughout Charge Le/tonne 144 144 144 114Total Import Parity Le/tonne 11328 11472 10464 5856

Le/IG 38.4 42.5 41.2 24.8

,Ex-Refinery Price 38.4 42.5 41.2 24.8 ;855Duty (as in footnote) 31.8 8.5 16.5 - -Total Mktg Co Margin (6%) 2.3 2.6 2.5 1.5 360Freetown Area Transport 0.8 0.8 0.8 0.3 20Dealer Commission 1.5 1.5 1.5 - -

Selling Price, Freetown 74.8 55.9 62.5 25.6 6235

Sensitivity at S10/bbl

CIF Freetown (S/ton) S/ton 134 135 124 66Selling Price, Freetown 44 33 37 15 3586

Note: Tax structure assumed is an average by West African standards: Gasoline, 80%; Kerosene,20%; Gasoil, 40%; Fuel oil, 0%. Transportation and marketing margins set at levels whichreflect economic costs and oil industry practice in LDCs.


2.30 Pricing Policy and its Objectives. If fiscal revenueobjectives of pricing are set aside, the nurpose of government policyshould be to ensure that prices signal the economic cost of supplies tothe consumer. However, this is not simple to implement in practice, as anumber of policy options are open to the Government in choosing prices toreflect economic costs.

2.31 First, at e time of uncertainty in international oil marketsand exchange rates, a choice has to be made between allowing prices toreflect the recent decline in oil prices, or raising them to a levelconsistent with the estimated long run cost. To sustain pricing reformwill require the resolution of short term and long term pricing trade-

offs. This is a complex issue which cannot be fully addressed here.Nevertheless, a balance must be reached between the advantages of price

stability and sustained conservation efforts resulting from pricing basedon long run costs, and the economic benefits of passing on lower shortrun prices to industry and final consumers of energy. At the momentdomestic prices are lower than they should be to reflect the recentchanges in oil prices and exchange rates, or short run marginal costs.

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Therefore, immediate priority should be given to bringing these prices atleast into line with current opportunity costs.

2.32 Second, the issue of pricing cannot be examined independent ofthe refinery viability issue. If the refinery is assumed to be viable inthe long run and the Covernment strategy is to retain it as an operatingentity, then a pricing policy where ex-refinery prices are determined byimport parity (-ather than cost plus pricing) could lead to largefluctuations in the financial position of the refinery. Large financiallosses sustained over a number of years, if spot prices remaineddepressed over that period, could bankrupt the refinery, unless supportedby tihe state. Hence, in determining domestic pricing policy, explicitrecognition needs to be given to product supply strategy.

2.33 Pricing Policy Options. The above analysis suggests thatthere are ambiguities and weaknesses, both in terms of pricing policyobjectives and the actual level and structure of prices. In the mission'sview, the Covernment has three main options for strengthening policy, asdefined below:

(a) Continue with the present approach in which ex-refinery pricesare based on a cost plus pricing scheme (allowing therefinery's costs to be covered).

(b) Link ex-refinery prices to import parity with regular reviewsand let the refinery operate as any other commercial entity.In such a scheme, the refinery could go bankrupt or operateonly when viable. In this option, prices would reflect shortrun economic costs.

(c) Link ex-refinery prices to import parity, but use a stabiliza-tion fund to minimize the fluctuation in ex-refinery prices dueto changing costs. A mean stabilized price would initially beestablished based on an assessment of long run costs. Therefiner or product supplier would then deposit to or withdrawfrom the fund when import prices were below or above the stabi-lized ex-refinery price. Only when the stabilization fund hita predetermined floor or ceiling would a review of the stabi-lized price be required. This scheme attempts to stabilize theex-refinery prices consistent with LRMC.

2.34 After the issue of policy objectives has been settled, optionsfor adjusting the level and structure of prices can be reviewed toestablish prices whicn signal appropriate economic costs.

2.35 Recommendations. The mission recommends that an independentstudy be carried out as soon as possible to examine pricing policy andstructure. The study should make recommendations on pricing policy andthe approach for establishing and reviewing prices, both at the retailand ex-refinery level, taking into account the effects of continuouslyvarying exchange rates and oil prices. This study should be carried out

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in conjunction with the establishment of a petroleum product supplystrategy and not independent of it. In the interim period, theGovernment should give priority to changing ex-refinery and retail pricesso that they, at least, reflect opportunity costs to the country.

The Role of the Government in Managing Shortages and Crises

2.36 There are major weaknesses in the way the Covernment has beenmanaging the shortages of petroleum products. These lie in the areas ofprocuring crude, establishing prices, and managing the crisis. There isan urgent need to strengthen the Government's monitorir.g and regulatoryfunctions in these areas.

2.37 Crude Procurement Arrangements. The DTI is limited in itsability to coordinate crude and product procurement arrangements by avariety of factors. These include:

(a) lack of international oil market intelligence;

(b) absence of a system for monitoring supply-demand balances inthe local market which would warn of impending shortages;

(c) absence of regular inter-ministerial coordination with the MOFfor scheduling foreign exchange to cover anticipateddeliveries; and

(d) political pressure for using a single implementation agency,such as CEVIL, to implement procurement arrangements and anapparent absence of a mardate to review and questionorocurement costs.

2.38 Procedures for Establishing Official Prices. The proceduresfor establishing prices are cumbersome and time consuming, and are notflexible enough to respond to current conditions in oil markets. Theresult is that prices are inconsistent with costs and give incorrectsignals to consumers. More specifically, there are no provisions for aregular review of prices or a pre-established formula for adjustingprices. Instead, requests for changes in ex-refinery prices or marketingmargins have to pass through various committees. In the case of the ex-refinery prices this includes the SLPRC Board, the PAC and, ultimately,the Ministerial Cabinet. Delays are inevitable. Simplifying thisprocedure or deregulating prices (at least partially) are two of theoptions for making prices more responsive to market conditions; thepresent decline in prices offers a good opportunity to implement changes.

2.39 Managing Crises. Irrespective of the DTI's best efforts,shortages of products will occur from time to time. Under conditions ofsevere shortages, the market will not be able to balance demand andsupply at a politically acceptable price level. Managing demand underthese conditions may require quantitative restrictions and rationing.The Government should have a contingency plan to determine allocation

- 27 -

priorities during such an emergency. This would help to allocatesupplies smoothly on a pre-arranged basis and avoid the chaos caused byshortages. The use of ration cards, or priority schedules worked outbefore hand with market ng companies are two options which the Governmentshould examine. The Government should also maintain a minimum level ofcrude oil in storage. One month's security storage should be more thansufficient in a situation where the voyage time to the normal source ofsupply (Nigeria) is only four to five days. A minimum stock level ofabout 20,000 tons (equivalent to approximately 30 days of consumption)should therefore be maintained. To accommodate both the security storageand the proposed larger cargo sizes of 30,000 tons, the amount of tankageassigned to crude would need to be raised from 40,000 to 50,000 tons.This can be done through reallocation of existing tanker serv,ces andwithout additional investment.

2.40 Distribution of Products in Rural Areas. Facilities fordistributing petroleum products in rural areas are grossly inadequate.The distribution companies are reluctant to extend such facilities due tothe small volume of trade and the h.gher cost and difficulties of trans-portation. This position is unlikely to change in the foreseeablefuture. Local traders, if at all interested, tend to expect considerablyhigher prices. In times of crisis, as was the case itn 1985, productprices in rural areas climb to levels three to four times higher than inFreetown and often supplies are not available at all. Shortages ofdiesel are, under normal circumstances, serious during planting andharvest time.

2.41 The Government should attach priority to extending a minimumlevel of marketing facilities to agricultural areas. One alternative tobe examined is to set up a number of small rural outlets to marketkerosene and diesel. These outlets could be operated by farmers'cooperatives. While the return from these outlets is unlikely to becommercially attractive, their wider impact on agricultural output andthe welfare of rural poor could be significant.

2.42 Recommendations. The ability of the DTI (or of the moreappropriate section within the MEP, which this report recommends as themore appropriate institutional body for regulating activities in the oilsubsector, see Chapter V) to monitor and regulate the market should bestrengthened by:

(a) creating a statistics and planning cell which would include themonitorinig of international oil markets as one of itsfunctions;

(b) providing training to staff assigned to planning cell;

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(c) developing an information system to compile, integrate, andanalyze data on exports, imports, refinery output, and sales;

(d) more clearly defining organizational objectives, accounta-bility, and staffing needs;

(e) developing an emergency plan for allocating available productsduring severe shortages in collaboration with the marketingcompanies;

(f) simplifying procedures for establishing prices and making themmore responsive to market conditions;

(g) evaluating the viability of establishing retail outlets inrural areas to be run by farmers' cooperatives; and

(h) raising the level of security supplies for crude oil to 30 daysof supply.

Long-Term Issues

2.43 The long term issues pertain to the economics of the refinery,the strategy for exploration promotion, and subsector organization. As abackground to a discussion of these issues, the future demand forpetroleum products are outlined in the form of two scenarios.

Future Demand for Petroleum Products

2.44 The long term issues which the Government must address in thepetroleum subsector should be evaluated against the future demand ferpetroleum products. Demand projections have been prepared both forinland consumption and international bunkers. Two scenarios, "Acceler-ated Growth" (AG) and "Base Case" (BC) were developed for both demandcategories and the combined results are summnarized below in Tables 2.7and 2.8. The key aspects of the sceaarios are that: (a) suppresseddemand for kerosene and gasoline is assumed to be diminishing over thenext few years; (b) the higher growth of demand under AG is driven byrising income and not by the increase or introduction of energy intensiveactivities--this is largely due to the assumption that recovery is basedon agricultural growth rather than industrialization; and (c) a reducedform of the Bumbuna Hydroelectric Scheme is introduced. Under theseassumptions, demand grows by about 1% under BC and 4.1Z under the highgrowth scenario. Because of the emphasis in agriculture, the product mixor "cut of the barrel," does not differ much between the scenarios. Theuse of thermal power plants, instead of Bumbuna, will generate more fueloil and gas oil consumption, as is shown in the same tables. In 1995,the introduction of Bumbuna would reduce the level of oil imports byapproximately $8.5 million in the AG scenario.

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Table 2.7: FORECAST SUMMARY OF INLAND AND BUNKER DEMANDACCELERATED GROWTH SCENARIO WITH REDUCED BUMBUNA

('000 Tons)

AG-Thermal a/1985 1986 1987 1988 1989 1990 1995 2000 1995 2000

Gasoline 34 47 46 48 51 53 62 79 62 79Jet/Kerosene 37 40 40 42 45 46 54 78 54 78Gas oil 75 82 78 78 82 88 111 142 113 142Fuel oil 37 44 49 52 55 60 39 34 97 95

Total 183 213 214 220 233 247 266 333 326 394

Total Market Product Mix (%)

Gasoline 18.4 21.9 21.7 21.9 21.9 21.6 23.3 23.8 19 20.1JetAKerosene 20.1 18.9 18.8 19.1 19.3 18.5 20.3 23.6 16.5 19.8Gas oil 41.1 38.6 36.4 35.3 35.1 35.5 41.7 42.5 34.8 36.0Fuel oil 20.4 20.6 23.1 23.7 23.7 24.4 14.7 10.1 29.7 24.1

Total 100.0 100.0 100.0% 100.0 100.0 100.0 100.0 100.0 100 100

a/ Petroleum demand with a pure thermal scheme instead of Bumbuna.


Table 2.8: FORECAST SUMWARY OF INLAND AND BUNKER DEMANDBASE CASE BASE CASE WITH REDUCED BUMBUNA

('000 tons)

Actual BC-Thermal1985 1986 1987 1988 1989 '990 1995 2000 2000 a/

Gasoline 34 48 46 47 46 46 47 53 55Jet/Kerosene 37 41 '9 39 40 39 41 53 53Gas oil 75 79 74 72 72 73 82 83 93Fuel oil 37 44 46 48 48 49 59 26 76

Total 183 2T2 205 206 206 207 229 215 277

Total Market Product Mix (%)

Gasoline 18.4% 22.3 22.3 23.3 22.4 22.2 20.7 25.2 20.0Jet/Kerosene 20.1% 19,2 19.2 19.3 19.5 18.7 17.9 24.3 19.3Gas oil 41.1% 37.7 35.9 35.2 34.9 35.4 35.7 38.2 33.3Fuel oil 20.4% 20.8 22.5 23.2 23.2 23.7 25.6 12.3 27.4

Total 1OO.OS 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

a/ Petroleum demand with a pure thermal scheme instead of Bumbuna.


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The Viability of the Refinery

2.45 Although it is suffering from crude shortages, attendant shut-down/start-up of operations, and is technically bankrupt from assumingthe cumulative interest on the Government's crude debt to the oilcompanies, the refinery appears to be operationally and manageriallysound. A key long term issue for the petroleum subsector is theviability of the refinery and how it fits into the least cost strategyfor supplying petroleum products.

2.46 The oil refinery is located at Kissy, and is owned and operatedby the SLPRC. SLPRC in turn is owned by the Government of Sierra Leone,private Sierra Leone interests, and three major international oilcompanies in the proportions given in Table 2.9.

Taole 2.9: REFINERY OWNERSHIP

Shareholders Share (%)

Government of Sierra Leone 50.0Precious Metals Marketing Corporation (PMMC) a/ 10.2Shell 17.7Texaco 10.8Mobil 11.3

Total 100.0

a! The Government holds a 35% interest in PMMC.

SLPRC is controlled by a board of directors consisting of ten shareholderrepresentatives. The Minister of Finance serves as ex-officio Chairmanof the Board. The refinery has a tot3l staff of 134 nationals.

2.47 Current Operations. The refinery was commissioned in 1969 witha design capacity of 10,000 barrels/day of light Iranian crude. It is a3imple crude distillation unit with LPG recovery facilities and asso-ciated equipment. It has been running in recent years on a diet ofpredominantly Nigerian light crude with 10% to 20% medium crude blendedin occasionally to meet product yield requirements. There is no gasolineoctane enhancement process such as a reformer, and until 1982, about12,000 tons of reformate, or high octane blending component (HOBC), wereimported annually and blended in with straight run gasoline to meetpremium grade octane specifications (93 RON). Because of foreign ex-change difficulties, reformate imports have been discontinued and onlyone grade of straight run gasoline is produced with maximum lead,3.0 grams/gallons, blended in to achieve a RON rating of 85-87. The re-sulting reduction in performance, which is being tolerated by the public,has required engine and spark plug adjustments.

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2.48 Operational Efficiency and Costs. The plant appears to be aneat, well configured facility in excellent condition. The staff, allnationals, are trained refinery professionals and have been followinggood maintenance and safety practices. They also have proper laboratoryfacilities for quality control and testing. Specialized professionalassistance is obtained at reasonable cost from BP under a technicalservice agreement for annual maintenance and procurement of somematerials and equipment. At the current level of operations, there areno major equipment requirements or deficiencies.

2.49 The operational statistics bear out the positive impression ofthe plant. Fuel and loss figures have been kept low (3.5%), at leastuntil recently. Between 1982 and 1985 this figure has crept upwards,reaching 5.1% in 1985. The increase is mainly caused by intermittentoperations due to lack of crude, and greater use of self-generated power,hence higher fuel use. More reliable supplies of crude and electricityfrom the NPA should restore fuel and loss figures to their former 3.5%level. With modest investments in energy conservation, the loss figurecould be reduced to 2.5%. Operational costs are also modest comparedwith other small refineries. In 1984, total costs were $2.7 million, or$1.63/barrel, converting Leone costs at the official exchange rate. For1985, the estimated figure is $1.58/barrel. Even these modest figuresare an overestimate because of an over valued exchange rate and restric-tions on throughput due to import restrictions. Assuming a rate of12 Leone!$ and normal throughput of 240,000 tons, operational costs for1985/86 are estimated at $0.93/barrel or $7/ton.

2.50 Economics of Refinery Operations. An evaluation of therefinery's economics in Annex 5 suggests that The refinery should be ableto run at break even or even incur a moderate profit if products from therefinery are priced at import parity.

2.51 The results show that even for the 1983-85 period--a difficultone for world refining--the Freetown refinery would have almost brokeneven on gross margin and its economic loss would have been aboutUS$2.1 million per year. In the first quarter of 1986, the refinery hadan economic surplus and it is projected to maintain one through 1986 andin the year 1990 if prices remain at their trend levels. In addition towhatever sutplus the refinery generates, it provides other benefi s inthe form of a center for technical and managerial excellence, ahydrocarbons testing laboratory, and employment and training spin-offs.

2.52 The main factors which support the refineries current viabilityare: (a) low operational costs due to relatively efficient operationsand the absence of (expensive) expatriate staff; (b) freight advantage oftransporting crude relative to products due to Sierra Leone's location--the cost of transporting crude from Nigeria (Bonny) to Freetown is abouthalf the cost of transporting products from Rotterdam, the base locationfor determining product prices, to Freetown; and (c) sunk capital costsof existing facilities and the relatively modest needs for future invest-ment over the next 10-15 years. The refinery's long term viability is

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therefore assured as long as it is run efficiently, no major changes inrefinery configuration are contemplated, and Sierra Leone continues toobtain crude at competitive terms from Nigeria. As the refinery'seconomics are finely balanced, a significant change in any one of theabove three variables, while unlikely, could make the refinery anuneconomic operation and the Government should be aware of thissensitivity.

2.53 Short and Long Run Viability. As discussed in the pricingsection, even if the refinery is viable in the long run, there may beprolonged periods when, due to product dumping, for example, spot pricesremain depressed and create large financial losses in the refinery.Under these circumstances, the refinery's operations should be closeddown or a stabilization fund put into effect. Regardless of whether therefinery is run as a purely commercial outfit or as a state enterprise,economic rationale suggests that its operations should be halted if thegross margin is negative for a prolonged period. In other words, ifvariable costs are not being covered, it would make sense to stopoperations, without firing the staff, until prices return to morefavorable levels. During this period, the refinery could operate as areceiving terminal for products. By following this approach, the maximumloss sustained could be limited to the level of fixed costs ($1.4 millionin 1985/86). For such a strategy to work in practice, the gross marginwould have to be carefully monitored. This approach might be more likelyto work if the refinery were operated on a purely commercial basis. Therisks to a commercial venture are that, even if the gross margin werepositive, it might not be high encugh to cover fixed costs, resulting insome losses. However, a commercial organization might be able to sustainthis level of losses for a couple of years with some help from theGovernment, if warranted. For this strategy to work in practice, ex-refinery prices would need to be linked to spot prices. This wouldcreate an incentive for efficiency at the refinery that would be missingin the regime based on a stabilization fund or the current cost pluspricing scheme.

2.54 EffecL of Bumbuna. According to Tables 2.7 and 2.8, fuel oilrequirements increase until the start-up of Bumbuna in 1993 (under theAccelerated Growth Scenario), or 1997 (under the Base Case Scenario).Until this point in time, the economics of the refinery will improve asrelatively less fuel will be exported at prices below import parity. Ineither scenario, the effect of Bumbuna coming on-stream would be todivert between 30,000 and 40,000 tons of fuel oil to export markets.With the estimated penalty at about $15/ton, the refinery's profits woulddecline by about $0.5-0.6 million when Bumbuna would start up.

2.55 Financial Situation. CLPRC has a policy of showing interestaccrued on the $58 million debt to the oil companies on its profit andloss account. Re-evaluation of the debt (in Leones) after a currency de-valuation adds to SLPRC's balance sheet liabilities and so far hasrendered it technically bankrupt; net worth in 1984 was a negativeLe 17.9 million. While the Government makes arrangements to repay the

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debt, the legal basis for carrying it on the refinery's books should bereviewed. In addition to the continued inclusion of the Government debtto the oil companies in the refinery's accounts, the financial perfor-mance of the refinery has been adversely affected in the recent past by:(a) increased fuel consumption and losses associated with frequent startup and shut down of opevations due to crude supply interruptions, and(b) delays in adjusting ex-refinery prices following increases in theLeone price of crude supplies. Both these problems have already beendiscussed above under short term issues together with suggestedsolutions. Their early resolution--which should result in improvementsin crude supplies and in the procedures for establishing prices--wouldsignificantly improve the refinery's finances.

Recommendations

(a) The refinery should be retained as an operating entity.However, a least cost strategy should be implemented, requiringthat the refinery be utilized only when crude and productprices allow it to operate with a positive gross margin. Whenthis is not possible, products should be imported directly.

(b) As the economics of the refinery are finely balanced, theimportation and use of Bonny Light Crude is stronglyrecommended to keep freight costs at a minimum. The use ofother crudes could well make refining uneconomic.

(c) To permit efficient monitoring of the refinery's financialcondition, ex-refinery prices should be equated to importparity and the refinery should be allowed to operate as acommerc.al entity.

(d) Any financial support which the Government provides to therefinery should be limited aLd non-recurring, and only grantedunder exceptional circumstances.

(e) Investments should be made in energy conservation measures toreduce fuel use and loss to 2.5% of crude through-put.

(f) The validity of charging accrued interest on oil company debtto the refinery's accounts should be reviewed.

Oil Exploration

2.56 As already indicated, exploration activities fall within thejurisdiction of the MOM. Negotiations on petroleum licensing agreementsare coordinated by the Director of Mines through a technical committeewhich includes representatives from the MOF, the Bank of Sierra Leone,and the Customs Service. The Geological Survey, which is part of theDirectorate of Mines, is in charge of monitoring ongoing explorationact iVi ties.

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2.57 This organization of exploration activities does not appearadequate enough to exploit the opportunities available. There is noformal organization for negotiating with the oil companies; the decisionsto conclude agreements depend on the office of the Head of State. Thereis no legal framework for exploration contracts. The country appearsill-equipped to carry out the sort of independent seismic investigationsand reassessments of past survey data that are necessary to activelypromote exploration activities. To address this last problem there is a1 million ECU project by the EEC designed to strengthen the staff andlaboratory facilities of the Geological Survey.

2.58 So far there are no proven oil or gas resources in SierraLeone. The Government is interested in evaluating all areas of thecountry which may have any potential for hydrocarbons. Geologically,only about 28,000 square miles of the country's offshore areas are ofinterest. These can be divided into two main areas: (a) the North Weststable shelf which is geologically related to Guinea, and (b) the SouthEastern shelf, related to Liberia (see Annex 6 for map). Most of theexploration activity in the last six years has been concentrated in thesouthern area, involving about 7,000 km of seismic and two wells, asdiscussed below.

2.59 Exploration efforts to date have been undertaken exclusively byprivate foreign oil companies operating under license. Littleexploration activity was carried out before 1979 when the Oxoco-Aracca-Sundance group signed a five-year exploration agreement with theGovernment. The Oxoco group "farmed out" the area to Mobil, whichdrilled the first well in Sierra Leone in 1982 and later abandoned it asa dry well. The area was subsequently "farmed out" to Amoco, whose firstwell, drilled in late 1985, also turned out to be dry. Amoco iscurrently ccncentrating its efforts in the southeastern area and hasrenewed its earlier agreement by signing a six-year contract in May of1986. This contract covers exploration over the entire 28,000 squaremiles of Sierra Leone's offshore areas. The agreement is divided intothree two-year periods requiring Amoco to give up a third of the conces-sion in May 1988, a further third in May 1990, and the remainder at theexpiration of the contract in 1992. Amoco's interest in this area is dueto its activities in neighboring Liberia, where its investigations haverevealed good petroleum prospects beyond the continental shelf. Geolo-gically the same prospects may exist beyond the Southeastern Shelf inSierra Leone, and Amoco appears to be keeping its options open while itis drilling its fourth well in Liberia.

2.60 Over the next few years exploration activities may increase inLiberia and Guinea and the results there will influence the evaluation ofprospects in Sierra Leone. Clearly the 28,000 square miles of offshoreareas are under-explored with only two wells drilled to date. Theexisting seismic and geological data show that there is a petroleumpotential though the geology suggests that possible oil "traps" aredifficult and will increase the risks for exploration activity. However,comparing the offshore with similar basins, a fair evaluation of the

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basin would require more wells to be drilled. Once Amoco relinquishesits offshore concessions in Sierra Leone, the Government should promoteexploration, attract more companies to the country, and open up the areato competitive bidding. The Government should be prepared to exploitthese opportunities. Due to the close geological relationship withLiberia and Guinea, it is also advisable that interpretation work andpromotion activities be coordinated betweeii the three countries under aregional project. These effo:ts need to be strengthened, particularly atthis time of decline in global exploration activity. While the idea of aregional project has been floated before, without coming to fruition,there is a case for trying again to establish such a project.

2.61 Recommendations. The Government should d&aw up a promotionstrategy to be implemented over the next 5-6 years to attract more oilcompanies for exploration. This strategy should include:

(a) additior-1 equipment and assistance for improving the storageof technical data, including sample cores;

(b) interpretation of existing data, including any generated byAmoco, to provide the Government with an independent evaluationof the petroleum potential;

(c) review of petroleum legislation and Model Contract;

(d) technical collaboration with Guinea and Liberia for a regionalevaluation and promotion so as to provide a greater incentiveto oi companies; and

(e) the development of a training program for the Directorate ofMines and the Geological Survey.

2.62 The above program should be prepared and planned in detail by apreliminary mission comprising:

(a) an experienced petroleum explorationist (about two months)

(b) an expert in petroleum laboratory and storage of informationand data (about one month).

The cost of this preliminary mission is evaluated at about $30,000. TheCosL of the total project over a three years period is estimated at 0.5-$1.5 million, depending on the amount of additional seismic data acqui-sition which certainly will be needed in the Northern part of thebasin. It is highly advisable that parts of this program (speciallyequipment, offices, and training) be coordinated with the EEC project.This would save time and money.

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Subsector Organization

2.63 An important role for the Government is to ensure the right

balance between private and public sector activities and improve theefficiency of public sector institutions. In this regard, one issue that

the Government has to address in the longer term is the role of NP, inwhich the state holds a majority share, 60%. NP, which took over BP's

marketing facilities during 1985, now has around a 40% share of the

market, with the remainder shared about equally between Shell, Texaco,

and Mobil. NP's share may already be considered excessively high from

the point of view of a competitive market. There are indications that NPintends to buy out Texaco. A take over would increase NP's share of the

market to 60%, giving it a dominant position and significantly reducing

the level of competition. It is important that the Government should

carefully review NP's role, in general, and the costs and benefits of

permitting NP to take such a dominant position, in particular.

2.64 There is always the need, particularly in a small LDC like

Sierra Leone, to strike a balance between the efficiency imparted by

rationalization or "streamlining" of the industry's facilities, staffing,

overheads, etc., and the competition imparted by increasing the number of

firms. One area where rationalization could be justified in Sierra Leone

is that of storage terminals and tankage. An NP-Texaco buyout would not,

however, achieve anything in this area since NP has no terminal facili-

ties of its own at present. The only possible advantage to the economyof a buy out is in terms of rationalization of the service station

network, as there are undoubtedly some NP-Texaco competing locations at

present.

2.65 With regard to competition, it is not clear even with four or

more companies how competitive a small market such as Sierra Leone is or

can be under the most favorable circumstances: each marketer receives

volumes from the common supply pool based on its historical market share;

ex-refinery prices are controlled; pump prices are controlled so there

can only be non-price competition; this leaves only the bulk consumer

business where there is some flexibility to give a discount off pump

prices based only on slight differentials in total marketing and trans-

port costs--the competition here is largely non-price as well. Having

said this, it is clear that there is competition between the companies,

even if it is non-price, from which the consumer benefits in terms of

service and the quality of the product. An NP-Texaco buyout would signi-

ficantly reduce whatever little competition exists without many benefits

accruing from the rationalization (as discussed in the previous para-

graph).

2.66 Recommendation. It is strongly recommended that NP should not

be permitted to buy out Texaco or any other marketing company. In addi-

tion, the Government should review the longer term balance between

private and public sector involvement in the marketing and distributionof oil products. Specifically, the Government should explicitly outline

the objective and role of a parastatal like NP: for example, is it meant

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to operate as a commercial company on an equal footing with othermarketing companies, or, is it expected to operate on a different basisincluding the provision of products and services (such as to the ruralareas) which, while important to the country, are not commerciallyviable?

Investment and Training Requirements

2.67 Investments. The refinery investment requirements have beenquite modest over recent years, as follows:

Table 2.10: REFINERY INVESTMENTS

(USS '000)

Year Amouint

1979 3081980 1181981 1001982 2581983 154

1984 501985 2361986 (projected) 224

2.68 Over this period, vehicles and on-site houses for certainsafety staff have accounted for more than half of the capital budget.Plant equipment only amounts to about 10% of the total. These figuresindicate the low level of investment that has been required to keep theplant operational. Investments in an energy conservation program at therefinery will cost an estimated US$0.5 million of which the Government'sshare would be US$0.25 million. However, before such an investment iscarried out, its economic viability should be studied (see technicalassistance section below for prefeasibility study). An additionalUS$1.0 million of public investment will be required for the Government'sshare of building security stocks to 30 days of consumption (about20,000 tons).

2.69 At present, there are a few small items required to enhance LPGrecovery but they amount to less than $50,000 and have already beenrequested in the foreign exchange pipeline.

2.70 There are no significant investment requirements for either therehabilitating or expanding of marketing company installations. Texacohas plans for a small jetty repair and improvement project at a cost of$60,000. An estimated $0.3 million of public investment will also be

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required for establishing 30 retail outlets on an experimental basis forkerosene and diesel in rural areas. As in the case of the refineryinvestment, a prefeasibility study should be carried out to evaluate thevabi1.ity of the investment (see technical assistance section).

2.71 Private truckers, financed by the marketing companies, are inimmediate need of some new vehicle stock. The estimated 28 x 1800 ICtrucks required within a year or two would cost about $1 million free oftaxes or duties. The financing of this investment should occurnaturally, with ro need for outside support, if the transport tariff isadjusted to economic, cost-recovery levels.

2.72 Technical Assistance and Training. The refinery is wellsupported by its BP contract in the area of process and maintenancetechnical services. Some of the senior staff would benefit, however,from broader, more economic and management-oriented courses.

2.73 There are staffing weaknesses also in the area of internationalcrude and product supply, economics, and pricing. The most efficient andeconomic way to upgrade personnel skills in this area is to run workshopsor seminars in Sierra Leone on the subject. Suggested attendees would bepersonnel designated for sector pricing/monitoring functions, centralenergy statistics, and planning personnel and refinery staff.

2.74 The marketers appear to have their training and technicalassistance needs well in hand through support from their internationalaffiliates. The training needs of NP staff, however, should be addressedby the Government.

2.75 As evidenced by the problems experienced on the mission inobtaining data, there is a pressing need to develop a petroleumaccounting and information system. Although many of the individualsources of data are quite good, there is a serious lack of integrationand reconciliation. Direct imports outside of the normalrefinery/marketers system are difficult to determine. A system, possiblycomputer based, could be developed, debugged, and made fully operationalover a period of 15 to 18 months. The cost of such a system would beapproximately $200,000.

2.76 The cost of the recommended exploration promotion package isestimated at $0.5-1.5 million. A preparatory mission, for designing andplanning the promotion, would cost an additional $30,000.

2.77 For refining, marketing, and distribution, the following areasneed to be investigated in greater detail either separately, or prefer-ably as components of a single study:

(a) the economic and technical viability of energy conservationinvestments at the refinery;

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(b) pricing policy both at ex-refinery and retail levels, includinga review of transportation margins for deliveries outsideFreetown; and

(c) the need and strategy for reorganizing distribution ofpetroleum products in rural areas.

The combined cost of all three study components is estimated at $100,000,with about half needed for reviewing pecroleum pricing structures andassociated supply (b).

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III. ELECTRICITY

Introduction

3.1 The public power supply system in Sierra Leone is relativelymodest in size. Electricity is an expensive form of energy in relationto household incomes and the purchasing power of the traditional craftand trading sector in Sierra Leone. At the same time the modern sector,including mining, industrial, and commercial activities, is small andmajor establishments have set up generation facilities independent of thepublic supply system. In fiscal year 1986 total sales of the power

3.2 The public utility system consists of the Western Area Gridcentered on the capital, Freetown, and fourteen isolated Provincialsystems in the rest of the country. About 90% of the electricitysupplied by the whole system is consumed in the country's four maincities: Freetown (82%), Kenema (3%), Bo (3%), and Makeni (2%). Twothirds of the approximately 30,000 residential connections to householdsare served by the Western Area Grid; the rest of the residentialconsumners are linked to the Provincial Systems. These residentialconsumers represent some 6% of the population that has direct access toelectricity supplies.

3.3 The public supply is managed by the NPA, a commercialparastatal with a national monopoly on electricity generation, trans-mission, and distribution. In principle, any type of private generationrequires an exemption from the NPA. However, because of deterioratingsupplies, all classes of customers have purchased generating sets and areoperatirig them with or without NPA's exemption. Based on a surveycarried out by the mission, a total of about 30 MW of private generationcapacity is now in place in the Western Area. These sets run on gasolineor gasoil (diesel fuel) and generate a combined ouitput of about 40 GWhannually. The output from these small producers, combined with privategeneration at the mines located in the provinces, exceeded NPA's totalgeneration of 93 GWh during FY86 (Table 3.1).

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Tab.e 3.1: POWER SUBSECTOR--BASIC DATA

National Power Authority Private generationWestern Area Isolated Provin- Total Small

Grid cial Systems Mines Producers Total

Installed Capacity (MW)

FY 1986 58 13 71 33 30 134

Generation (GWh)

FY 1971 76 17 93 70 a/ 163FY 1981 132 30 162 72 a/ 234FY 1986 85 8 93 64 40 197

Losses (%)

FY 1981 27 35 28 10 -

Fv 1986 27 40 29 10

a/ Not available, assumed negligible.

Source: NPA, Mission estimates.

3.4 The public power supply system is in a state of physical andfinancial disrepair, reflecting years of neglect, poor management, and ashortage of foreign exchange. At the time of the mission, less than halfthe installed generating capacity was in service, between cne-third andone-half of the electricity generated was being lost in .echnical andnon-technical losses, and consumers were experiencing frequent andprolonged supply interruptions. These problems intensified further overthe second half of 1986, reaching crisis proportions in September 1986,when only 6.2 MW of capacity was available to service an estimatedmaximum demand of 26 MW. Since then, supplies have improved somewhat butthe situation remains precarious with the system highly vulnerable tobreakdown. -I effect NPA, is unable to meet its responsibilities ofproviding adequate and reliable power supplies. NPA's current diffi-culties are the latest in a long history of managerial, technical, andfinancial problems at the utility during the last twenty years. Theseproblems have been compounded over the more recent past by shortages ofimported spare parts and fuel (for its smaller provincial units) due to alack of foreign exchange allocation. The major short term issue relatesto the institutional, physical, and financial pre-requisites for asuccessful rehabilitation program. These include: (a) an institutionalframework which would allow the utility to operate autonomously, giveadequate compensation to skilled staff, and ensure the effectiveness ofsenior management; (b) repairs and improvements to existing generatingfacilities; and (c) changes in tariffs and access to required levels offoreign exchange.

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3.5 Meanwhile, government planners must also look at the optionsavailable for meeting electricity demand in the longer term. Thedominant use of imported energy (oil products) to activate currentgeneration capacity makes it desirable to look into options for develop-ing hydroelectric resources which would both reduce this dependence andbe easier to maintain. At the same time, there is a need to examine theviability of and strategy for interconnecting isolated Provincial Systemsas part of an integrated long term expansion plan.

3.6 This chapter discusses the above short and long-term considera-tions in five sections. rhe first three focus exclusively on the rehabi-litation program. Section 1 evaluates the institutional and managerialproblems at the NPA and outlines the changes needed to successfullyimplement any program of physical and financial rehabilitation. Section2 considers options, including existing rehabilitation plans, for repair-ing and improving existing facilities and the level and reliability ofsupplies. Section 3 looks at the issue of tariffs and the changes neededto strengthen the financial position of the NPA and manage demand. InSection 4, the longer-term options for expanding the Western Area gridand the Provincial Systems are examined. The last section outlines aninvestment program for implementing the proposed rehab;litation measuresand initiating the least cost expansion program.

Institutional Reform: Raising the Effectiveness of NPA Management

3.7 A major factor underlying the current crisis at NPA is theexistence of a near paralysis in planning and decision making. This haseroded management effectiveness and lowered morale and overall perfor-mance. A fundamental restructuring of the organizational processes atthe NPA are essential even to ensure that a rehabilitated systermi willwork. Unless such a change takes place, physical and financial rehabili-tation (described in later sections) will not bring about a sustainedimprovement in the public power supply, which is the objective of therehabilitation program. Organizational and management problems at theNPA can be divided into two categories: (a) problems arising out of theinstitutional framework within which NPA operates, and (b) managerial andoperalional deficiencies within NPA itself. This section outlines somesuggestions for significantly altering the organizational processes inthese areas.

Institutional Framework

3.8 The power subsector is regulated by the MEP, which was createdin 1974 for establishing and implementing policy in the subsector. Incarrying out its role, the MEP appoints members of the Board of Directorsof NPA and reviews its annual budget and reports. NPA was incorporatedunder the Nitional Power Authority Act of 1982. The authority is run by

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the Board ot rs who appoint the Ceneral Manager. The Board iscomposed of fis :o seven members, with the General Manager an ex-officiomember.

3.9 NPA's urganizational structure is that of a conventionalutility consisting of the General Manager and six departmental headscovering finance, commercial engineering, generation, transmission anddistribution, provincial operations, and personnel. In addition there isa special project group for Bumbuna.

3.10 The main institutional problems faced by the NPA are: (a) alack of autonomy arising out its relationship with the MEP; (b) uncer-tainty about power sector policy; and (c) poor morale amongst skilledstaff due to low public service pay scales.

(a) Relationship between NPA and MEP. While the 1982 Act isintended to provide N4PA with a high degree of autonomy throughan independent Board, in practice this is not the case. MEPofficials tend to interfere with the day-to-day management ofNPA and the Ceneral Manager has effectively no financialindependence. Interference extends to important operationalareas such as management decisions to disconnect supplies tonon-paying customers. The General Manager's financialindependence is undermined by the need to get the Minister'sapproval for expenditures of even a few hundred Leones (lessthan $50). At the same time, there are diffZculties in gettingCovernment approval to raise tariffs. Part of the reason forinterference is the physical proximi.y between the NPA and theMEP; NPA shares its headquarters with the MEP. A factor ofgreater significance has been the absence of a strong Boa-:d,which could shield NPA management from political and otherpressures. The Minister can hire or fire any member of theBoard, as and when he sees fit, and in the past many membershave been civil servants or members of parliament. TheSecretary of the Board is the permanent secretary of the MEP.The result of the structure is that the NPA Board is highlysusceptible to MEP interference.

Since the assessment mission in February 1986, changes havetaken place in NPA's Board: a new Board has been appointed witha full-time chairman, and the General Manager has been re-placed. These changes have improved relations between the NPAand the MEP and have given NPA more autonomy than it has had inthe past few years. While these changes are in the rightdirection and will enhance the effectiveness of NPA management,the basic problem of autonomy and the absence of members withsound commercial exper.ise remains: the Board is still over-represented by incumbent or ex-civil service personnel, and thelimited autonomy which the Board may genuinely enjoy currentlyis dependent on the good will of the incumbent Minister ofEnergy and Power.

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(b) Uncertainty in power sector policy. The effectiveness of NPAmanagement has also been :ompromised by foreign exchangeproblems which have forced changes in power sector strategy andleft NPA without a policy framework in planning and decision-making. Shortages of foreign exchange have not only preventedplanned maintenance schedules at power stations due to a lackof imported spares, but they have also been the main factorbehind the Government's decision to delay the Bumbuna project(details discussed under long run issues). NPA had based itsstrategy on the project delivering power by 1986/87 and whichwould have considerably reduced demand on its operationalstaff. The delay has led to a temporary refocusing of effortson diesel plants. In the meanwhile, uncertainty persists aboutwhether the Government will allow the Bumbuna project to resumeoir replace it by alternative schemes. The change in directionLnd, more importantly, the continuing absence of an agreedpolicy on the subject has caused considerable confusion withinNPA and lowered morale.

(c) Staff remuneration and morale. NPA employs about 1,500 staff,divided approximately two-thirds to one-third between theWestern Area and the Provinces. The authority is overstaffedin terms of its unskilled employees and has been taking stepsrecently to try and reduce manning levels. This has proveddifficult as most employees are union members. The reverseproblem applies to skilled eta'f, which NPA has difficulty inretaining, because of low public sector *,ay scales which areoutside its control; salaries for technical staff are less thanhalf what they could earn in the private sector. This hascontributed to low morale and the utility has problems inkeeping the caliber of staff it needs. The issue of remuner-ation to skilled workers is now being looked into by NPA, butno concrete steps have as yet been taken.

Managerial and Technical Problems Within NPA

3.11 While external factors have not been favorable, both NPA andMEP recognize the need to strengthen NPA's management, planning,financial, and technical capabilities. It is difficult to assess thecontribution made by management weaknesses to NPA's current problems.The institutional difficulties described above, combined with foreignexchange problems, have made management's task difficult, if notimpossible. 7/ On the other hand, the mission was made aware of poormanagement practices in certain operational areas, such as the Kingtom

71 Senior management strongly feels that existing circumstances do notprovide a fair test of their capabilities.

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power station and the Provincial Systems, which were unrelated toinstitutional or resource constraints.

3.12 The Kingtom power station is the nucleus of power supplies inthe Western Area, yet there are no graduate (or equivalent) engineers onthe station staff. Training of technical operations and maintenancestaff has also been neglected. In the Provinces, there is a strongfeeling of isolation and neglect reinforced by the recent difficulties inobtaining fuel and spare parts (see next section). In part, this is dueto a lack of direct communications with the head office as there are notelephone connections. However, another reason is the limited contactwith head office staff responsible for Provincial Systems: field tripsmade by responsible officials are few and far between. Coordinating alarge number of widely dispersed provincial stations from Freetown is acostly operation which has added to NPA's financial and managementburdens.

Recommendations

3.13 To respond to these institutional and organizational problems,the mission recommends the following action program.

(a) As a first step, and before the implementation of anyrehabilitation measures, the following changes should be madeby the Government regarding the institutional framework withinwhich NPA operates:

(i) The NPA Act should be reviewed and modified so as to permitNPA to manage its affairs without undue interference fromthe MEP. The Act should be made more explicit about theterms on which members of the Nh" Board are appointed andtheir qualifications. For example, limits should be set onthe number of incumbent or ex-civil servants on the Board.The Act should also require the presence on the Board ofrespected members of the business community and representa-tives of consumers. To protect the Board's independence,the Act should specify a minimum period (preferably twoyears) for which members are appointed and during which theycannot be fired or replaced. The Government, while agreeingto the reconmendation in principle, has indicated thatpolitical constraints will, at present, prevent changes tothe NPA Act. However, it has agreed to these changes as atarget for the future. The mission acknowledges thesedifficulties but feels strongly that without changes to theNPA Act, an enduring solution to the problem of lack ofautonomy cannot emerge.

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(ii) A mechanism should be devised to ensure that: (a) NPA canregularly set tariffs at levels which allow it to recoverits costs on an agreed basis; and (b) it has access tosufficient foreign exchange for importing spare parts andcarrying out routine equipment maintenance.

(iii) In return for greater legal and financial autonomy NPAshould be required to: (a) run on a ^ommercial basisachieving a target rate of return; and (b) be fullvaccountable to the Minister of Energy and Power for itsperformance in providing reliable power supplies.

(iv) The MEP should focus its efforts on power sector policyformulation and coordination. One of its first tasks shouldbe the development of a policy statement outlining theGovernmentCs strategy for the sector in the short and longerterm.

(v) Remuneration to skilled NPA staff should be raised to makethem competitive with the private sector. This will requirea premium to be paid above public service scales as acompensation for technical skills.

(b) Once the institutional changes have been implemented, the nextstep is for the Government and the NPA to agree on the scopeand financing of a program to strengthen the organizationalprocesses at NPA. The following components should be part ofthe program:

(i) The senior management at NPA needs to be strengthened. Thedecision on the need for replacing members of the managementteam at the head office should be made by the new Board ofDirectors. However, at Kingtom, a plant supe-intendentshould be appointed as soon as possible. The personselected should have a proven track record of managing apower stations with slow speed diesels.

(ii) Planning sections covering the engineering and corporatefinancial functions should be introduced in NPA. Theseplanning functions should be set up to report directly tothe Ceneral Managzr.

(iii) The Covernment should actively review the viability of NPA'sProvincial Systems operations. Options to be consideredshould include: (a) decentralization; and (b) sellingProvincial Systems to the private sector or local communitygroups, when such possibilities arise.

(iv) The new technical training center (built with the help ofthe Federal Republic of Cermany) for secondary schoolleavers should be fully supported by NPA in terms of funds

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and staffing. Consideration should be given to the adoptionof an externally recognized technical qualification at theend of the course.

(v) A management development program should be designed formiddle tier management.

(vi) For technical staff at the intermediate and senior levelson-the-job training is required. At the more senior levelsof technical staff, training should include diagnosticevaluation and preventive maintenance techniques. At theintermediate levels, training should include: dieselinjector and turbocharger maintenance; pump maintenance;cable and overhead line construction and maintenance tech-niques; and maintenance of transfoomers, switchgear andprotective devices. Concentrated courses of short durationrun by visiting technical experts from manufacturers orspecialized utility training staff are also recommended.

Physical Rehabilitation of the Public Power Supply

3.14 The operational deficiencies associated with the decline inpower supplies arise out of two related factors: breakdown of plant andequipment, and the economic problems experienced by Sierra Leone over therecent past. Specifically, the principal causes of generacing plantbreakdowns have been a lack of preventative maintenance and a chronicshortage of spare parts due to foreign exchange limitations. Lack offuel has not been a major problem except in the Provincial Systems.These run on gasoil, of which there has been a major shortage. Thissection evaluates the operational problems underlying power shortages,their implications for NPA and its customers and the options available toease these problems.

3.15 Operational Problems. Generation in NPA's main grid, and theWestern system covering Freetown, has declined sharply over the past fewyears from 132 GWh in FY 1981 to an estimated 85.3 GWh in FY 1986, orsome 36Z. At the height of the crisis, in September 1986, NPA had only6 MW of capacity to meet the system's peak demand, estimated at 26 MW.The capacity available at the time of the mission, 28 MW, was less thanone-half of the installed capacity of 56.4 MW. Severe load shedding hasbeen experienced since February 1983, although it has been generallyplanned according to a predetermined schedule based on availablegeneration capacity. The supply situation has improved recently, withabout 18 MW of capacity available in March 1987. However, the situationremains precarious: there is no spare capacity to cover for plantbreakdown and supply is being maintained only by running some units onbase load, for 24 hours, even though they are not designed to operate inthis manner, thereby increasing the risk of future supply interventions.

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3.16 Experience in the fourteen isolated centers in the rest of thecountry (the Provincial System) has been even worse with combined outputin FY 1986 of 7.8 GWh, less than one-third of FY 1982 levels of 25 GWh.Since 1985 supply been restricted to a maximum service of 16 hours/day inall but one center, with some areas suffering more than others; genera-tion in Lungi has fallen by only 8% since 1981, whereas in Koidu thereduction was 63%.

3.17 Another symptom of NPA's malaise is a high level of losses:2I% in the Western Area and an average of about 40% in the Provinces withsome areas reporting losses of as much as 50%.

3.18 Generating plant breakdowns. The Western Area is supplied fromtwo diesel power stations located in Freetown (Table 3.2). The largerand newer diesel station, Kingtom, has a capacity of 38.2 MW, comprisingfive slow speed fuel oil engines commissioned between 1964 and 1980. Atthe time of the -nission, only three of the five units were available forservice and all of these were derated to a maximum total output of 15 MWbecause of cooling water and other technical problems. The two largeroperating engines (9.2 MW Sulzer units) were 3 to 5 years overdue formajor overhaul and could deliver a combined output of only 10 MW againsta rated capacity of 18.4 MW. Of the three Man units, only one was inservice. Its output has more recently declined from 5 to 3 KW. Thecapacity at Kingtom was significantly boosted by the installation of four3 MW mobile, high speed Deutz units. These units, which werecommissioned just before the mission, run on fuel oil but switch to themore expensive gas oil at high temperatures. Another drawback is thatthey are not designed to run as base load units, as NPA has been runningtlhem. The second station, Falconbridge, has a total capacity of 6 MWfrom 5 units commissioned between 1960 and 1976. The units all burngasoil. At the time of the mission only two units were available forservice providing a total output of less than 3 MW.

Table 3.2: POWER PLANTS ON WESTERN AREA GRID

Kingtom Falconbridge Total

Unit no. 1-3 4-5 6-9 1-3 4-5(Man) (Sulzer)(Deutz,mobile)

Nameplate rating (MW) 19.8 18.4 12.0 3.0 3.2 56.4Available a! (MW) 5.0 10.0 12.0 2.4 0 29.3Afterrehabilitation (MW) 17.7 18.4 12.0 2.4 2.8 53.3

Commissioning date 1964-71 1978-80 1986 1962 1976

Speed (rpm) 130.5 150 1000 428 750

a/ At the time of the mission in ear.y Rebruary.

Source: NPA.

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3.19 As can be seen in Table 3.2, the available capacity duringFebruary 1986 was 28.6 MW. This capacity was reduced significantlyduring the remainder of 1986 because of major overhauls carried out onthe two Sulzer units. 8/ Work has also been completed on the modifi-cation to the sea water cooling system on the Sulzer units at a cost of$1.1 million. This work, which is part of NPA's planned rehabilitationof all units at Kingtom and Falconbridge, has been carried out under thePower Sector Engineering and Technical Assistance Project funded by theIDA (Credit 1265-SL, 1982) and the OPEC Fund (Loan 292-P). The effectsof NPA's rehabilitation plan, if realized, are shown in Table 3.2. Theavailable capacity will then be raised to 53.3 MW. Allowing a reserveplant margin of the largest and next largest unit, the capacity would beadequate to meet a system demand of up to 37.5 MW.

3.20 In the fourteen isolated Provincial Systems under the controlof the NPA, the total plant capacity of 12.5 MW supplied an aggregatedemand of 8.6 MW in 1981. Since that time, available capacity hasdeclined because of a lack of spare parts. Three new 500 KW units havebeen installed at Port Loko, Makeni, and Koidu for more than two yearsbut have not been commissioned due to a contractual dispute. NPA shouldattempt to resolve this dispute as a matter of urgency and arrange forthese sets to be commissioned.

3.21 Transmissior./Distribution and System Losses. There is no majortechnical problem related to transmission and distribution in the WesternArea Grid except for switch gear. All of the seven 11 kV indoor typeprimary substations on the network are fitted with oil circuitbreakers. These have been placed under great strain because of regularload shedding since 1983 leading to contact erosion and, in someinstances, malfunctioning of the breaker. Apart from these maintenanceproblems, the substations are in good condition except for "Wilberforce"where the switch gear is of an obsolete design and in need of replace-ment.

3.22 Losses on both the Western Area and Provincial System3, asalready mentioned, are high: non-technical losses arising from illegalconnections, tampering with meters, faulty meters, and meter reading orbilling errors are considered to contribute 10-15% (out of a total of27%) losses in the Western Area and 20-25% (out of a total of 40%) lossesin the Provincial Systems. Both the split between technical and non-technical losses and the source of non-technical losses are urgently inneed of further study. There is a special investigative unit at NPA butits activities are restricted by lack of funds and equipment.

8/ The capacity, as mentioned earlier, has now recovered to about 18 MWfollowing the completion of repairs to one of the Sulzers.

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3.23 Factors Underlying Plant and Equipment Breakdown. There are anumber of common factors underlying all operational problems in plant andequipment in the NPA system. The first of these is a shortage of spareparts resulting from difficulties in obtaining foreign exchange. In manyinstances, plants have been idle for long periods because of theunavailability of relatively minor parts. A related problem is lack ofmaintenance. This is both because of the absence of spare parts andpressure on NPA staff in the current period of shortages not to takeplants out of service. At the time of the mission, the two Sulzer unitswere respectively 25,000 and 20,000 hours overdue for major overhaul.Later in the year, NPA obtained the spares to carry out the overhauls,purchased under a UK grant. The overhaul of one of the units has beencompleted, and the other is in progress. More spares are being purchasedunder IDA Credit 1265-SL.

3.24 Prolonged outages have occurred at Kingtom due to unexpectedtechnical problems. Four out of the five units have had problems asso-ciated with stator faults, foundation problems, broken tie bolts, andcooling water failure. These have each resulted in outages of betweenone and four years. It is difficult to assess how many of the technicalproblems could have been avoided through a better choice (if that wasopen to Sierra Leone) of the make of the generating sets before instal-lation. It is clear, however, that the delay in resolving these problemshas been exacerbated by shortages of qualified technical staff.

3.25 Shortages of Fuel. While the main constraint on the WesternSystem has been the shortage of serviceable generating capacity, for theProvincial Systems it has been the lack of fuel. The fuel supplyproblems have already been discussed in Chapter II. Suffice it to saythat the problems are much more severe in the Provinces. Part of thereason why the latter have borne the brunt of the fuel shortage problemis their exclusive use of gasoil. In thie case of the Western System,Kingtom operates on fuel oil, of which there was a surplus even in1985. The other reason is the lower priority given to the Provinces asillustrated by the following statistics for gasoil deliveries in 1985.

Table 3.3: GASOIL ORDORED AND SUPPLIED (1985)

Fuel Ordered Fuel Supplied % Supplied

Western Area 722,00C gallons 578,000 gallons 80

Provinces 2,747,000 gallons 733,000 gallons 27

Source: NPA.

The priority given to fuel deliveries to the Provincial System by the NPAhead office should be urgently reviewed. This problem has been aggra-vated by a lack of communication facilities between the Area Engineers atthe Provincial Centers and the NPA head office.

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3.26 Cost and Benefits of Rehabilitation. In 1985, the Bankestimated the costs of rehabilitating the Western Area System at about$12 million. Taking account of the work carried out since that time onthe generating plants at Kingtom (including $1.1 million for themodifications to the cooling system paid for by IDA), the missionestimates that a further $10 million is needed for rehabilitating theWestern system. Details are provided in the investment section below.

3.27 Since 1983, there has been a proliferation of privategeneration ranging in size from a few kilowatts for a private dwelling tohundreds of kilowatts installed at commercial and industrial establish-ments. A brief survey carried out by the mission estimated that there isprobably 25-35 MW of private generation capacity in the Western Area(Annex 7). The import and use of these small sets, which run on gasolineor gasoil, has added to the countries foreign exchange problems.

2.28 It is estimated (see Annex 7) that the use of privategenerating sets produced 40 GWh in FY86, and cost the economy$1.5 million more than if the power had been -enerated by the NPA (basedon the difference between the fuel cost of generating power at Kingtom ofUSC3.4/kWh and the autoproducers cost of USC7.1/kWh). 9/ When thecapacity cost of private generating plant is taken into account (based ona 10-year life, an annuity rate of 12%, and a cost per kW of $800), theannual cost rises to $4 million. These estimates suggest that the costof unreliable supplies to the economy may have been quite high. Arehabilitation program, which is successful in raising the reliability ofpublic supplies, would pay for itself by discouraging the use of privatesets. A saving of even $3 million a year would repay a $10 millioninvestment program in 3-4 years.

Concerns About Existing Rehabilitation Plans

3.29 A serious risk attached to existing rehabilitation plansconcerns the viability of repairs to the three MAN units at Kingtom.These units are about 20 years old and are approaching the end of theirnormal working lives: the three units have done 70,000, 85,000, and95,000 hours respectively compared to a usual maximum of between 100,000and 120,000 hours. In addition, all three units have experiencedfrequent and prolonged breakdowns in the past due to both foundationproblems and overheating of stator and rotor windings. While repairshave been and can be carried out in the future, the problems are likelyto reoccur if there are fundamental defects in these units, which are ofa prototype design. An independent expert should be called in to reviewthe technical and economic viability of keeping these units in service.

9/ The comparison with Kingtom is relevant because most of the demandwould have been supplied fLom base load plant--if it had been inservice.

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Contingency plans should also be made for new generation capacity toreplace these units.

3.30 Recommendations. NPA should consider adopting the followingstrategy to improve system operations:

(a) Rehabilitate all the generating plants at Kingtom andFalconbridge, with priority given to the overhaul of the Sulzerunits As the overhaul of the Sulzer units has brought avail-able capacity below the natural demand level, it is vital thatNPA proceed with completing the overhauls and rehabilitationprogram as a matter of extreme urgency.

(b) Carry out an urgent independent review to determine theeconomic and technical viability of keeping the three MAN unitsat Kingtom in service. Contingency plans should also be madefor new generating capacity to replace these units.

(c) Carry out a loss reduction study on the Western Area system,including an investigation into measures to reduce non-technical losses on the Provincial system.

(d) Commission the new diesel units at Port Loko, Makeni, andKoidu.

(e) Improve communications by the installation of a high frequencyradio system between Freetown and the main Provincial Centers.

(f) Initiate replacement of the 11 kV switchgear at Wilberforcesubstation.

Tariff Policy, Demand Management, and Financial Rehabilitation

3.31 Together with a strategy for rehabilitating the supply ofelectricity, the problem of power shortages should also be addressedthrough better demand management, including changes in tariff policy. Inthe long run, tariff increases would help to alleviate shortages bydampening demand, but because of the magnitude of suppressed demand, themore immediate impact of tariff increases is likely to come from animprovement in supplies through a strengthening of NPA's finances. Atthe time of the mission, tariffs were well below both the short and longrun costs of providing power and thus contributed to NPA's precariousfinances. This section evaluates the role of tariff policy in thecurrent crisis and emphasizes the urgent need for a review of thispolicy.

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Demand and Supply Side Implications of Tariff Policy

3.32 Tariff policy has direct implications for both NPA, thesupplier of electricity, and its customers.

3.33 On the demand side, the problem faced by the consumer is thatof suppressed demand. As shown in Table 3.4, after growing steadily overthe 70s, generation declined at an average rate of 12% p.a. between FY82and FY86 and falling to about the same level as in 1971. This declinehas seriously inconvenienced residential consumers and adversely affectedeconomic activity across a wide spectrum of users from tourist hotels tocommercial and industrial organizations. A measure of suppiessed demandand, therefore, of the welfare loss associated with supply diAruptions isprovided by the proliferation of private generating sets imported andused at considerable cost to the owners. The issue on the consumptionside is the extent to which demand management measures, such as tariffincreases or better allocation of available public supplies, can help tosignificantly alleviate the problem of suppressed demand.

Table 3.4: NPA GENERATION AND SALES

Growth rateFY1971 FY1982 FY1986 1971-82 1982-86

(GWh) (GWh) (GWh) (%/year) (%/year)

Generation)Western area 76.0 133.5 85.3 5.3 -10.6Provinces 16.5 24.9 7.8 3.8 -25.2

Total 92.5 158.4 93.1 5.0 -12.4

Sales

Western Area 60.0 98.1 62.3 4.6 -10.6Provinces 12.6 14.9 4.7 1.5 -25.1

Total 72.6 113.0 67.0 4.1 -12.2

3.34 On the supply side, past tariff policy has directly contributedto NPA's deteriorating finances. In FY85, total billings at 28 millionLe were well below operating costs of 39 million Le. Net losses for theyear amounted to 7 million Le ($1.2 million at the official exchangerate) in spite of a Government subsidy of 6 million Le. Net losses areestimated to have increased to 9 million Le in FY86. These losses havebeen mainly caused by declining sales and delays in Government approvalof tariff increases to compensate for increased costs. NPA is increa-singly short of cash and, currently, is even unable to pay for fuelsupplies, lubricants, or urgently needed spares. The issue here is theextent to which tariffs need to be raised to allow NPA to meet its finan-

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cial objectives without providing a cover for inefficient operations. Atthe same time, a mechanism needs to be agreed upon which would allow anestimation of tariff charges on a regular basis to reflect changes inNPA's cost--for example, to take account of changes in exchange rates andoil prices.

3.35 Suppressed Demand: Extent and Causes. An analysis ofhistorical data suggests that demand, prior to the inception of supplyproblems in 1982, was significantly influenced by changes in income: theshort run (one year) impact of a 1% increase in GDP is a 1.03% increasein demand. Eventually, over the long run, demand increases by 2.4%(Annex 8, page 3). Electricity tariffs also appear to have a statisti-cally significant linkage with demand but the exact magnitudo is subjectto some uncertainty: the estimates of short run price elast city rangefrom -0.17 to -0.34 (Annex 8, page 1). The lower end of the rangeimplies that the effect of tariff changes on demand is relatively weak,at least in the short run; a 1% increase in tariffs would only reducedemand by 0.17% in the short run and by 0.4% in the long run, assumingthe ratio of short to long run effects is the same as for income. Usingthe linkages estimated between demand and CDP and ignoring price effects,suppressed demand--the gap between demand and available supply--reached alevel of 81 GWh (Annex 9) in FY86, about the same as total generation inthe Western Area.

3.36 Tariff Increases and the Relative Economics of Public andPrivate Generation. The mission's nalysis suggests that the largeincreases in tariffs, as introduced recently to allow NPA to recover itscosts, may make it difficult for the utility to win back customers(especially those with access to privately generated supplies), andreturn sales to previous levels. Based on the mission's estimatesdiscussed earlier, autoproducers generated about 40 GWh in FY86, half thelevel of suppressed demand, the rest was lost. The short run cost ofautogeneration (based on fuel costs and ignoring capital costs as sunk)ranged from LE 0.6/kWh to LE 1.6/kWh in 1985, depending on the amount offuel purchased at black market prices (Annex 11). These costs provide ameasure of the willingness to pay during 1985 for alternative supplies byindustrial, commercial, and relatively well-off consumers, who accountfor the dominant proportion of sales. These costs were, on average, morethan twice the level of NPA's average tariff existing at the time of Le0.49/kWh, and higher than that recommended by the Bank in that year(1985), Le 1.0/kWh. If replacement cost for private generation capacityis taken into account, the difference between estimated willingness topay and existing or contemplated tariffs would be further magnified.With low, and as we suggest below, subsidized tariffs, electricitysupplies from NPA were highly competitive relative to self-generation.However, the relative economics of private and public supplies havechanged recently with the adoption by the Government of a large increasein the averag., tariff to Le 3.78/kWh (with large commercial andindustrial consumers paying Le 6.1/kWh, small commercial consumers payingLe 3.7/kWh, and residential consumers being charged Le 1.7/kWh). Themarginal cost of private generation, based on the most recent (April

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1987) gasoil price of Le 47/IG, is estimated at less than Le 3.5/kWh.With the marginal costs of private generation for industrial andcommercial consumers (who own more than 80% of private generators, seeAnnex 7) now well below the level of tariffs, NPA will have to demon-strate its ability to provide reliable supplies if it aims to quickly winback customers.

3.37 The seriousness of the problem is better appreciated by notingthat even these revised higher tariffs are now below economic costs,following the depreciation of the Leone and the need to be raised (seediscussion below on supply costs and tariffs), thereby further reducingthe competitiveness of public supplies. A major factor behind the highcost of electricity supplies, and their lack of competitiveness, is thehigh level of losses. These need to be curtailed to make a significantreduction in NPA's costs. At the same time, the prices of gasoil, themain fuel used in private generating sets, have often been subsidized.The Government should at least ensure that gasoil prices at the retaillevel are continuously maintained at levels which reflect the economiccost of supplies, as discussed in Chapter II. NPA's sales are unlikelyto be choked off by the large tariff increase, given the magnitude ofsuppressed demand, especially from customers who do not have self-generation facilities. However, in the long run, a return to a stablepattern of growth in electricity sales, at prices which allow costrecovery, requires an improvement in NPA's performance (both in terms ofloss reduction and supply reliability), and a Government pricing policyfor petroleum products which does not discriminate against publicsupplies of electricity.

3.38 The Effect of Tariff Increases on Inflation and Affordabilityof Electricity Supplies. Quite separate from the issue of substitutionbetween private and public generation, increases in tariffs raisequestions regarding the impact on inflation, income distribution, and theaffordability of electricity consumption by residential users. Based onavailable evidence, however, none of these concerns provides a basis forholding back economically justifiable tariff increases. The results ofthe limited household energy survey carried out by the mission (discussedin more detail in Chapter IV) show that electricity consumption in urbanareas accounts for about 4% of the monthly budget of households. Thefigure is approximately the same for all the income classes surveyed,suggesting that households in all income classes would be adverselyaffected to the same extent by tariff increases. Po-icy makers shouldnot, therefore, shy away from tariff increases on the mistaken groundsthat they will bear excessively on the poor.

3.39 The effect of tariff increases on inflation is more difficultto assess, especially as no data is available on the proportion ofdomestic production costs accounted for by energy in general, andelectricity in particular. However, there are some grounds to suggestthat tariff increases would not add significantly to inflation. Firstly,all producers of domestically consumed goods and services cannot pass onhigher prices of electricity to consumers; there are Government controls

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on the prices of some products, while imports determine local prices onmany traded goods. So the ripple-through effect on the prices of othergoods and hence on inflation is likely to be attenuated. Secondly, inspite of the sharp rise in average tariffs during 1986 (from Le 0.49/kWhto Le 3.78/kWh), the increase in NPA's revenues (about 330 million Leeven assuming sales of 100 GWh) will still be less than 2% of theestimated GDP for 1987. If GDP is taken as a proxy for final demand inthe economy, the increase in tariffs does not appear to add significantlyto inflationary pressures: experiences in other developing countrieswhose degree of "openness" (as measured by the ratio of exports to GDP)is the same as for Sierra Leone (where exports account for about 30% ofCDP) suggests that an increase in energy prices yielding revenues equiva-lent to 2% of final demand would increase consumer prices by about thesame magnitude. Hence even the 800% increase in tariffs during 1986 isnot likely to increase inflation significantly above existing levels.

3.40 Lastly, the large increase in tariffs raises issues ofaffordability of electricity consumption in Sierra Leone. At the time ofthe household survey, the domestic tariff was Le 0.41/kWh, and electri-city consumption accounted for, as mentioned earlier, about 4% of themonthly budget. With the increase in the domestic tariff to Le 1.7/kWh,electricity's share of the household budget would have increased to 16%assuming that electricity consumption and wages remained largely un-changed. An increase of this magnitude would have severely strainedhousehold budgets. The consumers' response to such a shock is difficultto assess- The econometric estimates, discussed earlier, suggesting alow sensitivity of demand to price changes in the short run are not validfor the large and sudden increases experienced in 1986. Consumers couldwell respond by reducing consumption of electricity through reducedenergy usage (belt tightening measures) as well as by substitutirn ofother energy forms where economic, such as using a low grade light from afuelwood stove instead of an electric lamp; it is not clear that substi-tution of kerosene would save money, given the large increases in itsprices as well. However, while the price of electricity relative to theprice of labor (wages and salaries) may now appear high, it is a neces-sary signal of the costs of, what is for all practical purposes, a luxurygood in the Sierra Leone context.

3.41 Other Options for Managing Demand. The normal daily load curveon the Western System exhibits two peaks of approximately equal size, oneduring the day from 9:00 a.m. to 4:00 p.m. and one in the evening from8:00 p.m. to 11:00 p.m. This cycle gives a daily load factor of aJout83%. There is, therefore, little obvious scope for improving demand(load curve) management: a tariff, or other signal, to industrial andcommercial consumers not to consume during the evening peak would quicklyhave the effect of shifting the peak into the day. There are otherpossibilities for managing demand such as negotiations with largeconsumers for providing interruptible supplies. However, under existingcrisis conditions at NPA, such options for demand management should below in priority.

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Supply Costs and Tariffs

3.42 In the absence of an agreed system expansion plan, the basisfor evaluating the economic cost of electricity supply is assumed to bethe option which will generate power at the least expected cost--theReduced Bumbuna Project followed by thermal development--as evaluated ina later section. These estimates are indicative of a lower bound onfuture supply costs. The mission has made an approximate estimate of therange of average incremental costs for commissioning and operating newgenerating capacity and transmission and distribution extensionsassociated with this expansion option. Details and assumptions are inAnnex 17.

3.43 Marginal capacity costs of rehabilitating the existing systemand installing and operating new generation, transmission, anddistribution has been estimated at: (a) $630-$950/kW/year, depending onthe rate of growth of demand, for the medium voltage consumer on theinterconnected system; and (b) $330/kW/year for the medium voltageconsumer on the diesel isolated systems. For low voltage consumers thecapital charge is 20% higher. Marginal energy costs have been assessedon the basis of: (a) fuel (and lubricating) costs that are estimated forthe two alternative projections of fuel prices, discussed in Chapter I,and then averaged; and (b) an allowance for losses. Finally, averageincremental cost (marginal capacity plus marginal energy costs), havebeen assembled on the basis of an assumed operating regime of5,870 hours/year (67% use) for the interconnected system and an average2,200 hours/year (25% use) for the isolated syste.n (Table 3.5).

Table 3.5: NPA LONG RUN SUPPLY COSTS a/(Le/kWh in 1986 prices)

Base Case Scenario Accelerated Growth ScenarioMedium Low Medium Lowvoltage voltage voltage voltage

Marginal Energy CostsInterconnected system 2.0 2.2 2.1 2.3Isolated system 3.2 3.6 3.2 3.5

Virginal Capacity CostsInterconnected system 8.7 9.2 5.8 6.1Isolated system 11.4 12.8 6.1 6.5

Average Incremental CostsInterconnected system 10.7 (22.3) 11.4 (23.8) 7.9 (16.5) 8.4 (17.5)Isolated system 14.6 (30.4) 16.4 (34.2) 9.3 (19.4) 10.0 (20.8)

a/ The table is based on costs estimated In USS at constant 1986 r,rices (see Annex 17),and the figures in brackets are in USf/kWh at 1986 prices. The Leone values have beenderived by converting the dollar estimates using an exchange rate of Le 48/S. Thetoble can be re-estimated for any other exchange rate to a first approximation by con-verting back into dollars at Le 48/S and then reconverting at the new exchange rate.This approximation is valid as over 90% of costs are incurred in foreign exchange.

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3.44 The indicative economic costs suggest that on a kilowatt-hourbas;A: (a) delivered costs of electricity vary by more than a factor oftwo, from about Le 8-16 in 1986 terms; (b) supply costs are sensitiveboth to the size of the system being supplied and the rate of growth ofdemand (linked to the two scenarios); (c) low voltage supply costs arehigher than at the medium voltage level; and (d) off peak costs (i.e.,marginal energy costs) are in the range of 20% to 30% percent of averageincremental costs for medium voltage consumers. This pattern of supplycosts should form the basis of NPA's future tariff structure, if thecurrent system is eventually to be replaced by the least cost optioninvolving a mixed hydro-thermal system.

3.45 Tariff Structures. NPA's tariff schedule comprisesresidential, commercial, industrial, street lighting, and temporary con-sumers. There is a minimum charge per customer and charges per kWhincrease after the first 100 kWh of consumption. Tariffs for industrialcustomers both at low voltage (up to 15 kW) and high voltage (over 15 kW)differentiate between energy, demand, and reactive en rgy charges. De-tails of tne schedules existing at the time of the mi sion are given inAnnex 10. This tariff structure has a number of anomalies that have, inthe past, added to NPA's financial problems and provided incorrectsignals to consumers. A detailed review of this structure would need afull tariff study. There are, however, some obvious areas whereimprovements can be made, as revealed by comparing these tariffs with:(a) structure of average incremental costs, as discussed above; and(b) NPA's financial requirements. The following comments focus, first,on ways of enhancing the incentive effects of tariffs and, secondly, thelikely trends in average tariff levels taking account of more recentchanges implemented in the second half of 1986.

3.46 In terms of structure of existing rates, the most obviousdistortion is the differential between low voltage and medium voltagetariffs. The average level of tariff for low voltage consumers, at thet- of t.he mission, was around Le 0.45/kWh, which was not much differentfrom the average medium voltage rate of about Le 0.43/kWh. There shouldbe a greater differential between these categories to reflect the signi-ficantly lower costs of supplying customers who accept power at highervoltages.

3.47 Another structural anomaly was in the make-up of domestictariffs. The monthly kilowatt-hour charge for domestic consumers was inthe form of an increasing two block tariff: Le 0.41/kWh for the first100 kWh (the lifeline rate), and Le 0.47/kWh for higher levels ofconsumption. The problem lies in the band-width of the lifelinetariff. The household survey carried out by the mission suggests thatthe average domestic consumption is 55 kWh/month. A band-width of100 kWh/month is giving away benefits to relatively well-off consumers.A splitting of the lower block (0-50 kWh, and 50-100 kWh) is called forto reduce this subsidy. Neither this structural anomaly nor the previousone appear to have been fully addressed in the recent tariff revisions.

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3.48 Thirdly, the level of tariffs at the time of the mission wasbelow both the economic and financial costs of supply. Tariff levelshave been a continuous problem at NPA. The Government, for political andsocial reasons, has been unwilling to allow NPA to raise tariffs, exceptas a result of insistence from the Bank group. At the time of themission, the average tariff was Le 0.49/kWh. This was half the level ofLe 1/kWh that the Bank had recommended in 1985, (and equivalent to USE16/kWh) to enable NPA to recover its financial costs. As NPA's tariff isapplied unifotmly to all parts of the country, the rate of Le 0.49/kWhwas insufficient to even recover the fuel costs of the isolated systems,estimated at Le 0.52/kWh in 1985. (The provision of a Government subsidyto NPA for recovering losses on provincial losses does not eliminate thedistorted signal provides to consumers.) Recently, and as alreadymentioned, the Government, as part of the SAL negotiations, agreed toraise the tariffs to Le 3.75/kWh (or USC 15/kWh, based on an exchangerate of Le 25/$, valid at the time of the last increase during October-November 1986). Further increases will be necessary in future to bringtariffs into line with the financial and economic costs of supply; therapid depreciation of the Leone in recent months necessitates additionallarge increases. The Bank's most recent estimates suggest that tariffsneed be raised to about USC 20/kWh (see Annex 17) to allow full costrecovery and an 8% return on revalued assets, as agre_d in earlierdiscussions between the Bank and the Government. If tariffs are set atthis high level, then they will be at the upper end of the range of rates(USc 10-20/kWh) currently existing in other West African countrias. Theneed for such high rates is in part a reflection of the relativesy highlosses faced by NPA and suggests the urgency of measures to imlrove NPA'soperational efficiency. While losses are likely to decline ir. future asa result of efficiency improvements, it is expected that they will remainat sufficiently high levels (15-20%) to maintain the p:essure on long runsupply costs; the long run marginal cost of supply to customers at thegrid is estimated to be in the range of USC 16.5-23.8/kWh (Table 3.5).

3.49 Other Financial Weaknesses at the NPA: Billing and RevenueCollection. An additional faccor which has contributed to NPA's finan-cial weaknesses is billing and revenue collection. Bills, at the time ofthe mission, were two months late because of delays in their preparation;due to the lack of an in-house computer to assist in billing, bills aresent to Monrovia, Liberia, for preparation or are done by hand. Delaysin billing have led to cash flow difficulties. A related problem is thatof late payments by larger organizations anLd government departments. Inaddition to tariff changes, financial control has to be strengthened ifcash flow is to improve.

Recommendations

(a) NPA should implement a tariff study to design a more logicaltariff structure that would help to meet NPA's financialobjectives, reduce the existing anomalies and distortions, andmake suggestions on how tariffs should be changed at a time ofrapidly declining exchange rates and during a transition to ahydro-based system (the study should also define means for

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ensuring that only reasonable costs can be recovered by NPAthrough tariffs);

(b) NPA should carry out a study to determine the most appropriatecomputer hardware and software for in-house billing and proceedwithout delay to procurement; and

(c) NPA should develop an action plan for reducing arredrs.

Long Term-Issues

3.50 The main long term issue revolves around the options availablefor meeting the future demand for power in Sierra Leone. In consideringalternative development strategies, the government's long-term objectivesare: (a) the development of a hydro-based power system to reduce itsreliance on imported energy; and (b) interconnection of provincialcenters to improve the reliability of power supplies in the interior ofthe country. This section considers two aspects of the long run powersupply issue:

(a) the viability of the Bumbuna hydro electric scheme relative toother options to meet future demand in the Western Area; and

(b) development options for provincial centers.

As a background to this discussion future levels of power demandestimated under the two growth scenarios, AG, and BC are summarized inTable 3.6. Details of these projections are given in Annex 12. Theforecast demand is quite consistent with neighboring countriesexperiences for the period beyond 1990, as suppressed demand will beeliminated.

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Table 3.6: DEMAND FORECAST

Western Area Provinces Mines Total s/AG BC AG BC AG BC AG BC

Maximum Demand (MW)1986 22 22 3 3 10 10 35 351990 30 24 12 10 12 10 54 441995 48 29 22 11 53 10 83 502000 75 38 37 14 14 11 126 63

Generation (GWh)1986 85 85 8 8 64 64 197 1971990 167 141 41 35 73 61 284 2571995 280 169 64 42 83 65 430 296

2000 444 221 92 55 91 70 630 366

Sales (GWh)1986 62 62 5 5 58 58 165 1651990 131 108 27 23 66 55 227 2061995 238 135 49 31 75 59 365 2452000 378 177 78 44 82 63 541 304

Growth in generation (% p.a.)1986-2000 12.i 7.1 19.1 14.e 2.5 0.1 8.7 4.31990-2000 10.3 4.6 8.4 4.6 2.2 1.4 8.3 3.8

a/ Total figures for generation and sales include 20 GWh under BC and 3 GWhunder AG for smalI auto producers; for 1986, an estimate of 40 GWh isincluded urder both scenarius.

3.51 The main assumptions underlying these forecasts are: (a) overthe remainder of the 1980s, sales are supply constrained but demand isdriven by GDP growth beyond 1990; (b) the effect of the early tariffincreases, assumed under AG, are not reflected ir, the demand figuresuntil che early 1990s as suppressed demand, and are not eliminated untilFY88/89; (c) in the case of BC, no price effects are assumed since, underthis scenario, tariff increases are both late and limited; (d) technicaland non-technical power losses are assumed to decline to 20% (14% tech-nical, 6% non-technical) in the year 2000 under BC and to 15% (12% tech-nical, 3% non-technical) in the AG scenario; (e) mining power demand islinked to mining activity levels projected under the two scenarios; and(f) autogeneration declines under both scenarios following the rehabili-tation of the Western Area System--it falls to half its current level(20 GWh) under BC and to a negligible value (3 GWh) under AG.

Bumbuna vs. Other Development Options

3.52 The viability of the Bumbuna hydroelectric scheme is thecentral long term power issue. The main issue is whether Bumbuna is tobe preferred to alternative thermal or hydro options. If Bumbuna is thepreferred option, another issue is whether Phase 1 of che full BumbunaScheme (as originally designed, or the Reduced (version of the) Project

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should be constructed. On the basis of the availab.e data, the ReducedBumbuna Project is the least cost solution over a flairly wide range ofload growth forecasts and fuel price assumptions. However, there may beroom for improvement in the design and sequencing of the project which,as currently envisaged by the consultants to the Bumbuna scheme, is notoptimal. At the same time, the implementation of the scheme will requirethe resolution of macroeconomic financing constraints in terms of theavailability of both foreign exchange and of fiscal revenues required formeeting local costs.

3.53 Timing of Planned System Expansion. Once the rehabilitation ofthe Kingtom and Falconbridge power stations is completed, the plantsthere should be capable of a total output of 53.3 MW with all units inservice. This should be sufficient to meet the demand on the WesternArea system until FY93 on the AC forecast and FY97 on the BC forecast(Annex 13). However, in the event that it is uneconomic to restore theMAN units at the Kingtom to full service, then timing of the power systemexpansion will have to be brought forward.

3.54 Options for Power System Expansion. Tne following developmentoptions are technically viable for supplying power to the Western Area:

(a) The Mano Rivet ichene. The Mano River flows along the southernborder of Sieria Leone with Liberia. A potential hydro site onche river was identified in 1981 (see map) which could supporta 180 MW project at a cost of US$356 million ($1980/kW). Thescheme would involve a large storage reservoir providing over-season regulation of the river flow and energy production of760 GWh in an average year. The capacity of the scheme is muchlarger than could be absorbed by Sierra Leone for sometime.Hiowever, all the capacity could be absorbed by Liberia if itcould afford the scheme. The site is also significantly closerto Monrovia and the Liberian grid than it is to Freetown andthe Western Area grid. As such, it has been considered mainlyas a project for Liberia, at least for the next 20 years. Anyjoint venture between Sierra Leone and Liberia for thedevelopment of the Mano River Scheme would have to overcome thetechnical problem of different f-equencies; Liberia's powersupplies operate on a 60 cycle per second system compared with50 in the case of Sierra Leone. There are also politicaldifficulties involved in developing a scheme straddling theborder.

(b) Thermal Options. At present, Sierra Leone relies totally onimported oil for power generation. Known lignite deposits areof limited size and not a serious candidate for future thermalgeneration. The thermal options available for future powerplants in the Western Area are diesel engines burning fuel oil,steam plant burning either coal or fuel oil, and gas turbineplant burning gasoil. Steam plant is not economic againstdiesel at unit sizes below 20 MW but, at larg-r unit sizes,

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steam plant burning imported coal would be attractive for baseload duty, even at the current depressed prices of oil.Existing diesel plant would be retained for peaking duty if anew base load steam plant were to be construActed. These couldeventually be replaced by peaking gas turbinei.

(c) The Bumbuna Falls Hydroelectric Project covers the developmentof the potential of the Seli River upstream of the village ofBumbuna about 180 km from Freetown, for an ultimate total powerof 305 MW producing in an average year 1,250 GWh of firmenergy. Since both the power and energy represent about tentimes the present demand of the Western Area system andneighboring provincial load centers, the project would bedeveloped in phases with each phase constructed to match thedemand at the time. The optimum physical development sequenceinvolves four phases, with the third phase effected in twosteps.

The first phase would comprise a storage dam upstream of theBumbuna Falls, a power tunnel through the hillside to a shaftpower station in a ne ,hboring valley, thereby developing a nethead of 114 m. The installed capacity in Phase 1 would be two26.7 MW units. The Bumbuna reservoir storage would be small,insufficient to provide full over-season regulation of theriver flow. The reductions in energy available during the dryseason are shown in Annex 14. In Phase 2, a storage reservoir,capable of providing over-season storage, would be constructedat Yiben, about 30 km upstream of Bumbuna, and a third unitwould be installed in the Bumbuna power station, bringing thecapacity to 80 MW. In Phase 3a, the Yiben dam would be raisedby 15 m and three 15 MW turbines (fitted with 35 MW generators)installed in a power station at the foot of the dam. The Yibendam would be raised by a further 24 m in Phase 3b and thePhase 3a units uprated to 35 MW by the installation of newturbine runners. The final phase (Phase 4) would involve theconstruction of a second power station at Bumbuna with three4G MW units. Table 3.7 sets out details of the project andillustrates the effect on the cost of energy of the increasedstorage capacity in the second and subsequent phases of theproject.

(d) The Reduced Bumbuna Project comprises a revised Phase I designinvolving a higher dam--a 10 meter increase in height--and apower station, with a single 47 MW unit, at the foot of the damutilizing the spillway tunnel, thereby eliminating the longpressure tunnel. Economies were alsc made in other aspects ofthe design which would lead to reduced security of supply fromBumbuna, e.g., the elimination of the bottom outlet gates andthe installation of a single generating unit. These economiesresulted in a substantial reduction in the estimated capitalcost, see Table 3.7, at the expense of a lower net head (and

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therefore smaller energy production per unit of water) andreduced security of supply, as discussed later. However, inspite of lower energy production, there is a 23% reduction inthe average lifetime energy cost compared with the originalPhase 1 design. The capital cost estimates presented inTable 3.7 allow for two 23.5 MW generating units in the firstphase of the Reduced Project, thus improving supply reliabilityand providing better matching to the forecast system powerrequirements.

Table 3.7: BUMBUNA HYDRO PROJECT

Annual Energy Capital Average

Installed Cost c/ Cost of

Capacity Firm Average 1986 Energy a/

(MW) (GWh) (GW1h) (US$ m) (USf KWhj

Phase I b/ 53.4 206 350 159.05 7.7Phase 2 80 368 534 134.60 9,2

Phase 3A 125 718 886 94.79 7.4

Phase 3B 185 1 148 1 212 80.59 6.4Phase 4 305 2 248 1 458 91.71 6.4

Total Project 305 1 248 458 560.74 6.4

Reduced Project

Phase 1 b/ 47 157 290 98.47 5.9 d/

e/ Present value of capital and operational cos5S per unit of energy

generated on average. Estimate based on 12% discount rate, 50 yearlife, and 1986 costs, does not include distribution costs.

b/ Excludes S22.7 million for works already completed.

c/ Cost figures are in financial terms and differ from the economic cost

estimates given in Annex '4, Figures are inclusive of transmission

costs.

d/ Note that average costs are between one-third ano one-fourth the levelof estimated LMRC given in Table 3.5. The divergence is partly due tothe differences between marginal and average costs. In addition, theaverage cost estimate does not take account of distribution costs, aswel l as the technical and non-technical losses of the power utility,which are expected to remain relatively high even afier efficiencyimprovements have been implemented.

Source: Bumbuna Feasibility Reporls, 1980 and 1984 Supplement, and

mission calculations.

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3.55 The Problem Relating to the Bumbuna Scheme. The hydroelectricpotential of Sierra Leone was examined in a report for the United Nationsprepared in 1971. 10/ A total 22 potential sites were identified andpreliminary designs and cost estimates prepared. The 1971 Reportrecommendations identified three sites as worthy of detailedinvestigation. These were:

Bumbuna Falls (72 MW) 40 km north east of MakeniBenkongor Falls (15.2 MW) 40 km west of KoiduGoma (18 MW) 30 km north of Kenema

3.56 Bumbuna, designed to supply the Western Area, the missing load,and towns along the transmission route to Freetown, was identified as themost attractive scheme and a full feasibility study was prepared in 1980which recommended an estimated 305 MW project to be developed in fivephases. This scheme involved an additional upstream reservoir notenvisaged in the 1971 UN report, thus allowing much greater output.Subsequently, work commenced on Phase 1 of the project with contracts letfor the construction of camps and access roads and the main diversiontunnels; this work was completed in 1985. Meanwhile, the Bank prepared a

report expressing reservations about the economic viability of Bumbunaagainst the background of the depressed Sierra Leone economy. 11/ As

part of the ensuing discussions, two main questions were raised by theBank: the ability of the country to finance a project costingUS$165 million (Phase 1 cost at 1980 prices, excluding escalation andinterest during construction, including cost of civil, works nowcompleted) and the high specific cost of Phase 1 relative to thesubsequent phases of the project.

3.57 The first phase of the project was then scaled down to 47 MW(from 71 MW) in the form of a Reduced Project at World Bank request. Theaim was to minimize capital expenditure wit},out detracting from the tech-nical viability of the subsequent development. However, even the ReducedProject has been deferred because of continuing doubts abotit its viabil-ity, timing, aid affordability by the country.

3.58 Opti,ons Evaluated in the Analysis. An evaluation of thL leastcost plan has been made by making a comparison of the most favorableschemes to supply the future demand for power in the Western Area undereach of the following options:

10! The strengthening of the Sierra Leone Electricity Corporation,November 1971, Motor-Colombus.

11/ Macroeconomic impact of the Bumbuna Hydroelectric Project,November 22, 1983.

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- pure thermal scheme;- full Bumbuna development;- reduced Bumbuna Phase 1, followed by pure thermal; and- Bumbuna Phase 1, followed by pure thermal

3.59 The analysis attempts to identify the scheme that will offerthe greatest likelihood of providing the required amount of power atleast-cost, taking account of a range of load growth and oil priceassumptions. Internal rate of return (IRR) calculations which were notcarried out because of time constraints should be done as a follow-upexercise. A second point to be made is that the optimal developmentsequence, following the Reduced Bumbuna Project, has not been worked outby the project's consultants. In this analysis, it has been assumed thatit will be followed by thermal schemes. For the sake of simplicity andto make a comparison easier, a fourth option was introduced with theoriginal Phase 1 design of the Bumbuna scheme followed by a thermaldevelopment.

3.60 The Procedure for Comparison. For each option, an optimalsequence of new plant additions "plantings") was arrived at to meet thegrowth in ;>mand for power under the AG scenario to the year FY2020. Theplanting sequence under each option was adjusted, using a computersimulation of the system's operations, so as to minimize the presentvalue of total capital and operating costs subject to the satisfaction ofcertain reliability conditions for the power supply. 12/ The basicoptimization was carried out at a discount rate of 12X and using theBank's internal base price projections for oil and coal prices(Annex 3.9).

3.61 The above exercise was repeated for demand growth under the BCscenario. In this manner for each option, two optimal development pathswere derived, one under AG and the other under BC conditions. Asensitivity analysis was also carried out to see how the discounted valueof total costs for each path would vary with an alternate oil pricedevelopment (see Annex 15) and different discount rdtes.

3.62 Economic Comparison of Options. The results of theoptimization exercise are shown in Table 3.8 below. The figures revealthat the Reduced Bumbuna scheme (followed by thermal plants) iseconomically the most attractive of the four options examined. Out ofthe 16 combinations of oil price, discount rate, and load growthassumptions examined, the Reduced Bumbuna is the least-cost solution intwelve cases and does not deviate significantly from the least-cost

12/ The minimum reserve plant margin, designed to give reasonable supplysecurity, was the use of the largest unit on the system plus 15% ofthe demand for the thermal scheme and largest unit plus 5% of demandfor the more reliable hydro schemes. An average was used for mixedschemes.

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option in the other four cases. The largest deviation from least-costoccurs at the highest discount rate and under the alternative low oilprice evolution. It is interesting to note, however, that the fullBumbuna development is economically inferior to the pure theralal option(in 12 out of 16 cases). This, in part reflects the high capital costsfor the full Bumbuna Scheme as well as the use of coal as a low costthermal generation option. A discount rate of 8% or less would be neededto make the full Bumbuna option attractive. More details of the analysisincluding planting options and estimates of costs are given in Annexes 13and 14.

Table 3.8: COMPARISON OF BUMBUNA OPTIONS(present value in millions of USS, of capital and

operating costs estimated at 1986 prices)

Accelerated Growth Base CaseDiscount Base oil Alt. Base oil Alt. oil

Option Rate price price price price

Full Bumbuna Project 8 300 295 162 16110 237 234 127 12512 193 191 100 9914 161 160 81 80

Thermal 8 339 303 168 15810 238 215 116 10912 174 158 83 7814 130 119 61 57

Reduced Bumbuna Project a/ 8 303 (3) 280 b/ 130 b/ 123 b/10 221 b/ 207 b/ 96 D/ 91 bl12 168 b/ 159 (1) 74 b/ 71 b/14 132 (2) 127 (8) 60 b/ 56 b/

Phase I of Full Project 8 329 308 148 14210 246 234 114 11012 193 185 90 8714 156 151 74 71

a/ Figures in brackets give the increment above the least cost solution.

b/ Denotes where the Reduced Bumbuna Project is the least cost.

Source: Mission calculations.

3.63 Effect of Investment Options on the Balance of Payments. Therelative effect on the balance of payments of three of the four mainoptions (the pure thermal scheme, the full Bumbuna option, and theReduced Bumbuna scheme) over the period 1990 to the year 2000 are shownin Annex 16 for both scenarios, AG and BC. In assessing the possibleimpact on the foreign exchange balance, average loan terms of 12 yearsrepayment period and a 10% interest rate have been used. The outflowsfor servicing the loans in the case of the two Bumbuna options arepartially offset by the gains from the decline in oil imports due to theuse of the hydroelectric schemes. The results show that, over that

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period, the Reduced Bumbuna scheme will lead under the AG scenario togreater net outflows than the pure thermal scheme but the level of excessoutflows is relatively small--on average $1-2 million per annum--in theearly years when the amortization burden is assumed to be high based on a12 year loan and could be treated as an insurance premium for greatersupply reliability compared to oil imports. It should be noted that thebalance of payments impact for the Bumbuna schemes will be more favorablewith better financing terms than assumed in the analysis (i.e., 10% rateof interest with repayment over 12 years). The results under the BCscenario are broadly similar.

3.64 Financial Constraints and the Impa-t of the Bumbuna Scheme onthe Sierra Leone Economy. The Bumbuna scheme represents a "lumpy" orrelatively large investment for the Sierra Leone economy and has in thepast, as discussed earlier, raised legitimate concern about its likelymacroeconomic impact. At the macroeconomic level, there are threespecific issues relating to Bumbuna: (a) the feasibility of financingsuch a lumpy investment from the limited foreign and budgetary resourcesavailable to the Government, given other development priorities; (b) theability of the economy to service the debt arising from the investment;and (c) the secondary or general equilibrium consequences of the invest-ment. A thorough evaluation of these questions, while essential forestablishing the priority and timing of the scheme, is outside the scopeof this report. Nevertheless, based on available information, someobservations are given below to place these important concerns intocontext and indica,te directions for future work on these issues.

3.65 The first point to be made is that the scaling down of theproject from its original design will significantly reduce the potentialmacroeconomic impact. The Bank's earlier reservations about the project,detailed in its 1983 report on the subjoct as 'iscussed above, related toPhase 1 of the full Bumbuna scheme, costing approximately S220 million in1982 dollars. The reduced Bumbuna project, after taking account of workalready completed, is estimated to cost about $100 million at 1986prices, less than half the amount of the original scheme. The analysisof the previous section suggests that the balance of payments impact ofthe reduced scheme is not significantly different from that of thealternative, less lumpy investment in a number of smaller thermalgeneration facilities, after account is taken of the savings in oilimports. Hence the debt service burden would not bc greatly improved byavoiding investing in the scheme.

3.66 Besides the external account, Bumbuna will increase aggregatedemand and add to the Government's fiscal burden, but these effectsappear to be relatively weak. The local component of the reduced Bumbunainvestment is estimated at Le 204 million at 1986 prices (or$13.9 million at the average exchange rate of Le 14.7/$). It is spreadover six years, and peaks in the fourth year at Le 50.4 million (seeAnnex 9, page 3). Under the AG scenario, where coristruction begins in1988, the peak expenditure would be incurred in 1991. Based on latestinternal Bank projections, the domestic expenditure on Bumbuna in 1991

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will add to the fiscal burden by an amount equivalent to 4.3Z of totalGovernment revenues, including grants, for that year (estimated atLe 1,185 million, at 1986 prices). This percentage assumes that alllocal expenditures are financed by Government revenues and not fromforeign borrowing, which would lower the fiscal burden. Moreover, thefinancial rehabilitation of NPA would enable it to fund a substantialpart of the local costs of Bumbuna from internally generated revenues.Local expenditures on Bumbuna will also add to aggregate demand but, hereagain, the size of the impact appears to be modest: increasedexpenditures during the peak period, 1991, are less than 0.J% of GDP,equivalent to Le 10,453 million at 1986 prices (internal Bank projec-tion). These effects will be even smaller if the construction of thescheme is delayed as is the case in the BC scenario.

3.67 The second point concerning the macroeconomic impact of Bumbunais that, in spite of the scaling down of the project, the "lumpiness" ofthe project will lead to financing problems: the project would initiallyrequire the allocation of a significant amount of scarce foreign exchangethereby crowding out imports needed for other projects. A measure of thedifficulty is provided by comparing import requirements during projectconstruction with the Bank's latest projection of the capital inflows toSierra Leone, in the form of grants and medium and long term loans.Project related imports, estimated to total $84.6 million at 1986 prices,will as in the case of local expenditures, be spread over six years,peaking in the fourth year (Annex 14). Under the AG scenario, importswill peak in 1991 at $24.3 million, in current prices. This expenditurewill be financed from a total of only $70 million available from grantsand net medium and long term borrowing. New forecasts of capital inflowsare unlikely to change the qualitative conclusion that financialdifficulties will be encountered if Bumbuna is constructed during thelate 1980s and early 1990s. However, the emphasis in Government policyshould be on investing in an economically and technically sound projectwhich the country can maintain. The financial problems should berecognized and managed, but should not be the reason for cancelling orinordinately delaying the project. In the long run, efficiency criteriamust dominate in project selection. The focus of future work on theissue of financing anu project selection should be on (a): evaluating theeconomic rate of return (ERR, for the project (the equalizing diLcounLrate for the project--the discount rate at which the Reduced Scheme andits thermal alternative supply electricity at equal cost--lies between12% and 14%, as revealed by Table 3.8, but is not a reliable measure ofthe ERR); (b) assessing the magnitude of suppliers' credit for theproject which, as it represents additional funds, will reduce thecrowding out effect; and (c) evaluating options for spreading out foreignexchange payments and for better management of the financing problem.

3.68 The third and last point to be made is that any analysis of thesecond round, or general equiiibrium, effects of the Bumbuna investmentshould take account of changes currently taking place in economy. Forexample, the shift to a system of flexible exchange rates, if fullyimplemented, will reduce, if not eliminate, the adverse effects on

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exports from any price increcses that result from domestic spending onthe scheme; in a system of fixed exchange rates, rising domestic pricesof traded goods would reduce exports and increase imports by makinglocally produced goods less competitive. At the same time, structuralchanges to the economy, as envisaged in current negotiations at the Bank,will help to reduce wage rigidity and dampen what is, potentially, themost important second round effect: the impact on the price of labor,both skilled and unskilled. The increased flexibility in labor marketswill temper any increase in wages that occur as a result of increaseddemand for unskilled labor arising from the project. The effect on thedemand for skilled labor and hence on its wages would also be reduced bythe use of expatriate staff by contractors. Further, in the longer run,Bumbuna will reduce the demand on skilled labor, as it would berelatively easy to maintain, compared to coal or oil-fired powergeneration stations. Taking these factors into account, it is by nomeans clear that the secondary effects of the reduced Bumbuna schemewould produce significantly adverse consequences for the economy.

3.69 Shortcomings of the Reduced Bumbuna Design. There are two mainshortcomings in the design, as it currently stands. Firstly, inintroducing economies, the risk of supply interruptions has increased;double circuit transmission lines have been replaced by a single circuitline, and a single generating unit has been introduced in place of thetwo Francis units, in the original Phase 1. At the same time, bottomoutlet gates have been eliminated at the end of the spillway tunnel sothat, apparently, there i, -) back up system to control the flow of waterin the tunnel if the inlet gates were to malfunction. Secondly, theoptimal development sequence for Bumbuna, following tt.e Reduced project,needs to be worked out; in this analysis, it was assumed that there wouldbe no further development of Bumbuna. Both these shortcomings need to bestudied before a final decision on Bumbuna is made.

3.70 Interconnection with Neighboring Countries. One of theproblems with the full Bui.buna Project is the high cost of the firstphase, relative to the amount of firm (or dependable) energy available.In the second phase, the construction of the Yiben storage reservoirincreases the firm energy available from 206 GWh to 368 GWh. Aninterconnection with, say, Guinea would make available a larger marketfor the output of Bumbuna thus providing two benefits:

(a) the energy available during the wet season, which could not beabsorbed by the NPA system, could be absorbed by Guinea,provided the Guinea system does not also have a surplus ofhydro energy during the wet season; and

(b) Phase 2 and subsequent phases of the Bumbuna Project could bebrought forward, thus enabling the lower energy costs to berealized earlier (see Table 3.7).

3.71 A transmission interconnection with Conakry would involve, as aminimum, a single-circuit 132 kV line from Lunsar, via Kambia, a distance

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of some 190 km. The approximate capital cost of the interconnectionwould be US$10 million, or an annual charge of US$1.4 million. 13/ Inorder to justify tha interconnection by fuel savings to Guinea, thiswould require a minimum annual transfer of about 40 GWh fron Bumbuna,assuming replacement of diesel generation using heavy fuel. Under Phase1 of both the full and reduced Bumbuna options, there is surplus hydroenergy during the wet season (but not during the dry season) in the ini-tial years. Under the AG scenario, the surplus energy figures are givenin Table 3.9. On the basis of these figures, an interconnection withGuinea would appear to be worth more detailed study. If the surplusenergy could be sold to Guinea, with suitable take or pay contracts, thenthe economics of the Full Project will become more attractive.

Table 3.9: BUMBUNA SURPLUS ENERGY IN WET SEASON (AG SCENARIO)

Fiscal_Year Full Bumbuna Reduced Bumbuna

(GWh) (GWh)

1993 107 731994 88 541995 66 341996 44 171997 28 71998 49 01999 21 02000 2 0

Development_Options for Provincial Load Centers

3.72 The Role of Small Hydro Schemes. In addition to the 1971 UNstudy on the hydroelectric potential of Sierra Leone, two other studieshave been carried out in recenr years. Details of the schemes identifiedin these stud. - are summarized below in Table 3.10. The schemes areshown in the n,. at the end of the report. The majority of these schemesare run of the river and will require supplementary diesel generationduring the dry season. In these circumstances, the question arises as towhether any of these schemes could be economically developed to supplyresidential and mining Loads in the Provinces and eventually form part ofan integrated national or regionaL work or network.

13/ Assuming 30 year life, 12% discount rate and O&M costs equivalent to1.6% of the capital cost.

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Table 3.10: DETAILS OF SMALL HYDRO SCHEMES

Scheme Installed Capital EqualizingType Location Capacity Cost a/ Cost Discount Rate

(MW) (USSa) (USS/kW)

Gbangbaia Moyamba 1.0 3.4 3 410 10.4 b/(Run of River)

Gandorhun BO 20.0 65.4 3 270 10.0 b/(Run of River)

Mawaloko Kabala 0.5 d/ 3.2 6 420 9.3 bl(Rur. of River)

Benkongor Falls Kono 10.8 22.0 2 040 29.5 c/

Betmai I'alls Magburaka 3.6 13.5 3 750 12.8 c/(Run of River)

Singimi Falls Moyamba 7.2 28.0 3 890 20.8 c/(Limited Storage)

Kambatimbo Falls Komadugu 0.8 6.6 8 250 5.2 c/(River Diversion)

a/ 1985 Costs.

b/ Return against diesel alternative; no real increase ii fuel prices.

c/ Return 3gainst diesel alternaive; 2% then 4% (after year 5) escalation of all costs.

d/ Installed in stages.

Source: CEDSI/CANREDE Ltd., March 1983; SNC, December 1985; and mission calculations.

3.73 An appreciation of the problem facing most small hydro sites in

Sierra Leone is obtained from the experience of the Goma scheme identi-

fied by the original UN study and being constructed by Chinese help. The

site at Coma, north of Kenema, is being developed as a 4MW station to

feed Kenema and local villages initially, but will also supply Bo when

the Bo-Kernema transmission project is completed. At Coma the dependable

output is only 0.5 MW during the dry season compared with the 4 MW

installed capacity. As a back up tor the dry season, a 5 MW heavy fuel

oil plant is to be constructed at Bo. The 4 MW of hydrogeneration

available from Goma for most of the year will take economic preference

over oil generation. The mission estimated that the load factor

(utilization factor) for the fuel oil plant will be of the order of 10%,

hardly high enough to justity the additional capital and operating costs,

and tht transportation difficulties associated with transporting fuel oil

from Freetown.

3.74 No details of the economic evaluation of the Coma project were

available, but Table 3.10 gives an initial evaluation of the viability of

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other schemes. The two schemes that appear most attractive are the Ben-kongor Falls (10.8 MW) and the Singimi Falls (7.2 MW). The equalizingdiscount rate (rate above which thermal options are of lower ccst) forthese two projects is above 20x. This is partly because they are not runof the river and partly because large mining loads nearby would absorbmost of the output of the schemes from the outset (gold and diamond minesin the case of Benkongor and rutile and bauxite mining in the case ofSingimi) giving themr a high load factor. The total cost of the twoprojects is an estimated $50 million and their capitalized value,including fuel and maintenance should not exceed $56 million. Benkungorwould also produce more energy than local demand and could be eitherscaled down or connected with a national grid in future. Both schemesanpear attractive, especially as they will save on diesel for powelgeneration currently being imported by the mines, and their feasibilityshould be reviewed at an early date.

3.75 Interconnection of Isolated Power Plants. Th. numerousisolated power systems in the Provinces impose a considerable strain onthe resources of NPA in terms of technical staff, maintenance, fuelsupplies, and administration. NPA is fully aware of these problems andis committed to interconnection where it is technically cnd economicallyfeasible. A more detailed policy needs to be identified for futureinterconnections to prevent haphazard development. In principle,interconnections should be made whenever they become economicallyfeasible. However, the design of interconnection schemes should conformto an agreed national standard.

3.76 The Marampa iron ore mine at Lunsar, which is now closed, has atotal of 10.7 MW of medium speed diesel generating plant lying idle. Atpresent, the plant is in good condition but it will deteriorate if it isnot used. In view of NPA's current capacity shortages, it is suggestedthat discussions be held with the mine authorities with a view topurchase of power either on a regular or standby basis. The mine couldbe connected to the Western Area grid by advancing the construction ofthe section of the Bumbuna-Freetown transmission line between Freetownand Lunsar.

3.77 Supplies from Neighboring Countries. Should the Mano RiverProject be constructed, eventually there might be a case for interconnec-tion of the Sierra Leone and Liberia systems. However, different systemfrequencies, and the relatively large distances from the Mano projectsite to Freetown, would tend to negate the case for full interconnec-tion. If the project is constructed initially to serve mainly Liberia, asmall part of the output could supply the more remote southern parts ofSierra Leone, which are a long way from the Western Area grid.

Recommendations

3.78 The analysis carried out in this Assessment indicates that theReduced Bumbuna project is attractive, relative to alternative thermaloptions over a wide range of load forecast and fuel price assumptions.

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However, there was insufficient data to decide on the optimum design ofthe project in terms of sequencing (i.e., development strategy to followthe reduced version of Phase 1). At the same time, there are questionsrelating to the physical design which need to be addressed (for example,the need for extra gates) before the project is taken further. A numberof interesting small hydro schemes have elso been identified which maymeet a high proportion of the demand of the mining sector with consequentsubstantial savings in fuel imports. The implementation of some of thesehydro prospects may make interconnection of a number of ProvincialSys-ems economic. However, the viability of the identified small hydroschemes and possible regional interconnectiors need furtherinvestigation.

3.79 The mission recommends that NPA should address the mainunanswered question raised above before making a final decisicn withregard to Bumbuna and the development of Provincial Systems. Thefollowing steps are recommended for identifying a least-cost strategy formeeting future power demand in Sierra Leone:

(a) prepare , comprehensive load forecast for the whole country,including a survey of the needs of auto-producers;

(b) determine the optimum development sequence of the Bumbunaproject and finalize the design of Phase 1;

(c) investigate the prospects for export of surplus energy fromBumbuna to Guinea and the benefits of mutual power and energyexchanges on a firm or standby basis;

Cd) in conjunction with (b) and (c), determine the viability andoptimum sequence of development of the small hydro schemes atSingimi Falls and Benkongor Falls (examine also the possibilityof joint ventures with mining companies);

'e) examine the possibility of interconnection of isolatedProvincial Systems where it is economic to do so and outlinetechnical standards to be adopted in interconnection schemes.

(f) review the generating capacity of the major mines and evaluatetile feasibility of using unutilized capacity to supply localdemand; and

(g) identify optimum transmission and distribution development,taking account of the least-cost generation development and thefindings cf the proposed loss reduction study,

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3.80 In addition to the above issues, NPA should:

(a) investigate the feasibility of an interconnection between theMarampa mine and the Wes*.ern Area system to utilize the idlegenerating capacity at the mine; and

(b) reconsider the location of the proposed heavy fuel burningdiesel station at Bo.

Investment

Trends 1981-1986

3.81 NPA.'s investment u 3gram over the past five years has beenseverely limited because of a chronic shortage of foreign exchange, alack of internally generated investment funds because of inadequatetariff levels, and the curtailment of the Bumbuna ptoject, which was tohave been commissioned in 1986/87. The total investment over the periodFY81 to FY86 is estimated at approximately US$45.9 million, made up asshown in Table 3.11. The figure includes Government investment inelectricity which has been passed on to NPA, either as a direct grant orin the form of equity.

Table 3.11: ESTIMATED INVESTMENT IN NPA ASSETS FOR FY 1981-86

item Cost

(USS million)

Bumbuna Project 22.7Kingtom Cooling System 1.0Kingtom Rehabilitation a/ 4.2Kingtom Mcoile Diesels 5.0Goma Hydro Project 11.4Provincial Generation 1.3Training and Miscellaneous 0.3Total 45.9

a/ Includes some transmission and distribution work.

t/ Based on 2,132 kW of capacity added s:nce FV8I at USS60/kW.

Source: NPA, Government accounts, mission estimates.

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Table 3.12: ESTIMATES OF NPP INVESTMENT REQUIREMENTS FY87-91BASE CASE SCENARIO(1986 USS million)

Fiscal Yea- 1987 1988 1989 1990 1991 rota

BoAKenema Project 1.80 3.60 3.60 9.00Kingtom rehabilitation 0.25 1.18 1.87 0.55 1.33 5.18Kingtom spare parts 1.58 1.58Transmission and distribution 0.9Q 0.94 0.47 0.47 0.46 3.28Provincial systems 0.50 0.50 0.50 1.50General plant 0.11 0.11 0.11 0.11 0.44Master Plan Study 0.10 0.10 0.20Tariff studies 0.02 0.10 0.12Engineering studies 0.18 0.28 0.46Technical assistance 0.12 0.67 0.38 1.17Communications 0.11 0.13 0.43 0.75 1.42Loss reduction study 0.10 0.10Total 5.19 6.82 7.18 2.23 3.03 24.45

Note: Further investment in Bumbuna not needed until FY*2.

Source: World Bank and mission estimates.

Table 3.13: ESTIMATES OF NPA INVESTMENT REQUIREMENTS FY37-93ACCELERATED GROWTH SCENARIO

(1986 USS million)

Fiscal Year 1987 1988 1989 1990 1991 1992 1993 Total

Bumbuna project 1.79 22.80 20.13 23.81 23.56 6.38 98.47Bo/Kenema project 1.80 7.20 9.00Kingtom rehabilitation 0.25 1.18 1.87 0.55 1.33 5.18Kingtoin spare parts 1.58 1.58Trarsmission and distribution 1.88 1.40 2.68 2.63 1.33 9.92Provincial systems 0.50 0.50 0.50 1.50Ge;leral plant 0.22 0.22 0.40 0.65 1.49Master plan study 0.10 0.10 0.20Tariff studies 0.02 0.10 0.12Engineering studies 0.18 0.28 0.46Technicni assistance 0.12 0.67 0.38 1.17Communications 0.11 0.13 0.43 0.75 1.42Loss reduction study 0.10 0.10Tctal 6,13 12,78 28.70 24.81 28.25 23.56 6.38 130.61

Note: Investment requirements after FY91 not identified, apart from Bumbuna. Bumbunacosts relate to Reduced Project (Phase 1).

Source: World Bank and mission estimates.

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Future Requirements

3.82 NPA's investment requirements in the short term will cover therehabilitation of the generating plant at Kingtom and Falconbridge,togetner with a restocking of spare patcs for both the Western Area powerstations and the Provincial stations. A limited amount of funds arerequired to provide technical assistance to assist in the commissioningof the new diesel units at Port Loko, Makeni, and Koidu, and for therepair of the damaged alternator at Makeni. Tables 3.12 and 3.13 showthe investment requirements under the AG and BC scenarios. Under AC,investment requirements 'or he Reduced Bumbuna Project are included asit is assumed to be commissioned by FY93 in that scenario. Under 1C, theBumbuna scheme is commissioned in 1997 and no expenditures are envisagedbefore 1991. Investment will also be required in transmission expansionand distribution rehabilitation, in order to meet the forecast loadgrowth under both scenarios. Some of the investments have already beenidentified under a power system rehabilitation project to be funded bythe World Bank and the European Economic Community. The remaining itemscover technical assistance for training, engineering studies, purchase ofa computer billing system, and a communications system between Freetownand the Provincial centers.

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IV. WOODFUELS/HOUSHHOLD ENERCY

Reasons for Concern

4.1 Available data on household c,nsumption patterns reveals a highdependence on fuelwood, which nakes consumers vulnerable to increases inits price, and, at tuie same time, creates pressures on the country'swoodfuel resources. Household energy consumption is about 85 of totalfinal energy use in the Sierra Leone economy. About 97% of this consump-tion is supplied from woodfuel resources which dominate household energyuse in both rural and urban areas. At the moment, woodfuel supplies atthe national level appear adequate in physical terms to meet an estimateddemand of 3.9 million cubic meters per annum, but there are growing signsof regional shortages near urban areas; prices of fuelwood in Freetownhave gone up by 150% in real terms betwee., 1983 and 1985 and are now a;levels ($10-15/ton at a Le 25/$ exchange rate) comparable withneighboring cointries, such as Ghana, experiencing acute shortages nearurban areas. Increases in fuelwood prices have contributed to higherenergy costs for a majority of urban households. Based on a limitedconsumer survey in Freetown, the mission found that energy expendituresabsorb as much as 40% of the income of poor urban households (Table 4.1).

Table 4.1: HOUSEHOLD ENERGY EXPENDITURES AS A SHARE OF MONTHLY INCOME

Monthly Income Class Fuelwood Charcoal Kerosene Electricity Total

0-300 Le 22.3% 3.2% 9.2% 4.9% 39.6%301-500 Le 8.2% 2.2% 7.6% 2.6% 20.6%501-800 Le 8.3% 1.5% 4.6% 2.3% 16.7%+ 800 Le 0.9% 2.6% 3.7% 3.0% 10.2%

Source: Mission estimates from survey of 128 households (details in Annex 18).

4.2 There are two main issues regarding household energy in generaland woodfuels in particular: the first worry concerns the affordabilityof household energy supplies; the second pertains to the sustainabilityof current patterns of woodfuel consumption over t . next ten to fiiteenyears. The affordability issue arises because of the mission's findings,mentioned above, that a significant proportion of the income of urbanhouseholds is being allocated to energy purchases and at a level which isnot sustainable. These results, while based on a small sample, are con-sistent with the findings of earlier studias (see Annex 18). At the veryleast, they are indicative of a growing and serious problem and underlinethe need for the Government to give greater attenticai to this problem andconsider policy options for rrducing household energy costs. This issueis particularly relevant at a time when the Governmern has significantlyincreasea the prices of petroleum products and power supplies.

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4.3 The second worry relates to the likelihocd and nature of thefuelwood crisis over the next ten to fifteen years if the present pace ofgrowth in woodfuel demand is sustained. Very little work has been doneon existing consumption patterns and potential supplies of woodfuels.Lack of both anal sis and reliable data makes it too difficult to assesswhether the existing regional shortages would develop into a majorfuelwood crisis in the foreseeable future, and if so what policy optionsare available to prevent such a crisis.

4.4 This chapter is composed of four sections. The first two sec-tions provide the framework for discussing the above concerns which areclosely interlinked and cannot be evaluated independently. Section oneexamines the characteristics of household energy use in order to throwsome light on the factors underlying high energy costs and th. choicCbetween fuelwood, charcoal, and i,iodern fuels. Section two focuses on thesupply and demand for woodfuels and reviews the problem of regionalscarcities and the supply side factors, including institutional weak-nesses, which have contributed to the increased prices of fuelwood inurban markets. The third section considers a possible woodfuels andhousehold energy strategy for addressing the affordability and sustain-ability issues as part of an integrated approach for providing householdenergy at least cost. The final section outlines an investment and tech-nical assistance program for implementing the proposed strategy over thenext Live years.

Characteristics of Household Energy Use

4.5 Pattern of Household Consiumption: The Dependence on Fuelwood.As shown in Table 4.2, 98% of household consumption is primarily forcooking and the remainder is for lighting or cooling. Woodfuels supply97% of total consumption, with fuelwood being the overwhelming choice forhousehold cooking, both in urban and rural areas.

4.6 While the picture conveyed by Table 4.2 is generally valid forall parts of the country, there are some significant differences betweenthe pattern of urban and rural consumption. Fuelwood remains a "freegoo,i" for the vast majority ot rural households in Sierra Leone, withmost families gathering their wood requirements from local forestresources in the process of clearing land for slhifting agriculture. Percapita fuelwood consumption in the rural areas is estimated to be of theorder of 600 kg per annum and accounts for virtually all household energyuse. In the urban areas, such as Freetown where there is a price and aflourishing market for fuelwood, per capita use declines to an average ofabout 400 kg per annum. In the case of other fuels, the rural-urbancontrasts are greater. The estimates for annual per capita consumptionof other fuels in urban and rural areas are respectively: charcoal, 50 kgand 10 kg; kerosene, 18 liters and 5 liters; electricity, 55 kWh and5 kWh. These estimates are within the range experienced in other WestAfrican countries. The most notable exception is the low level of market

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penetration by charcoal in urban areas; for example Freetown consumpLionestimates of 50 kg per capita are well below estimated urban area use inLiberia (141 kg) and Senegal (230 kg).

Table 4.2: ESTIMATED HOUSEHOLD ENEFGY CONSUMPTION, 1986('000 toe)

Cooking and Lighting and

Ironing cooling Total (%)

Fuelwood 728 -- 728 (92%)Charcoal 38 -- 38 (4.8%)Kerosene 4 17 21 (2.7%)Electricity - 3 3 (0.4%)LPG 1 __ I (0.1%)

Total (%) 771(98%) 20(2%) 791 (100%)

Source: Mission estimates and earlier surveys arranged by University of Sierra Leone.

4.7 The relatively low levels of urbanization in Sierra Leone meansthat only 15-20% of national fuelwood consumption is commercialized; theremainder is not traded. Conservation and substitution measures need todiffer between the areas where fuelwood is a traded good and those whereit is not. In ateas where fuelwood is traded, the key factors affectingfuture demand for fuelwood (and with it household energy costs) are:(a) the retail price of fuelwood compared with other household fuels;(b) the efficiency and costs of cooking stoves for wood and other fuels;and (c) household income and purchasing power.

4.8 Relative Prices, Inefficient Stoves, and the Comparative Costof Using Alternative Fuels. In spite of the recent sharp increases inthe prices of fuelwood and the low efficiencies of existing stoves,fuelwood remains competitive with respect to other household fuels.Table 4.3 shows that, at the time of the mission, the marginal cost ofcooking anergy delivered to the pot was approximately the same for woodand charcoal but higher for other fuels: electricity and kerosene (pur-chased by the "pint" from street venders) were between 35% to 40% moreexpensive than fuelwood purchased in bundles. These differences will bemagnified by the recently announced large increase in the price ofkerosene and electricity. (Kerosene purchased by the gallon atsubsidized official prices has the lowest financial cost per unit ofutilized energy in Table 4.3. However, this option was not available tomost householders due to the widespread shortages of petroleum produk.tssold at official prices. The increase in the official prices of kerosenewould, in any circumstances, remove this anomaly.) There is, therefore,no incentive to switch away from woodfuels for cooking until these rela-tive costs shift in favor of modern fuels, or, given consumer preferencefor the convenience value of modern fuels, the cost differential is at

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least significantly eroded. This appears unlikely in the foreseeablefuture with the Government committed to a policy of full-cost pricing andthe long run costs of both petroleum products and electricity expected tostay at or above current prices in Sierra Leone. Consequently, the useof kerosene and electricity will be largely restricted, as at present, tolighting needs except in the higher income brackets.

Table 4.3: COMPARATIVE CvSTS OF COOKING FUELS IN FREETOWN,FEBRUARY, 1986

Costs per unit EnLrgy Cost per unit of Conversion Cost per unit ofFuel purchased content energy purchased efficiency energy utilized

(avg) (MJ/unit) (SLO/MJ) I%) (SLIZ/MJ)

FhelwoodSplit bundles 0.32 Le/kg 15.1 MJ/kg 2.1 11 18.6Whole bundles 0.27 Le/kg 1.8 15.9

CharcoalSmall bags (2 kg) 1.03 Le/kg 27.5 MJ/kg 3.75 21 17.8Large Bags (15-22 Kg) 0.31 Le/kg 3.0 14.2Heaps b/ 1.57 Le/kg Not Av.

Kerosanelmperiai gallons 4 Le/gal 159.1 MJ/gal 2.5 35 7.1

of pisfS a/ 12 le/gal 7.5 21.4

Electricity 0.49 Le/kWh 3.6 MJ/kWh 13.6 60 22.7

a/ Recycled beer bottles, approx. 13.7 "pints" per imperial gallon.

b/ Used primarily for ironing.

Source: Mission estimTates.

4.9 The importance of conversion efficiency for the competitivenessand the costs of traditional fucls is illustrated in Table 4.3. In thetable, fuelwood is by far the cheapest fuel in terms of costs per unit ofenergy purchased but is almost twice as expensive to use as kerosene pur-chased at official prices due to low conversion efficiencies. Experiencein othe; West African countries suggests that the efficiency of thetraditional three-stone fuelwood stove (or, more accurately, pot supportfor cooking over an open fire) is about half the level of availableimproved wood stoves. The introduction of such stoves would signifi-cantly cut back energy costs and reduce the amount of fuelwood used forcooking; if fuelwood prices were to continue to increase then theimproved stoves would at least prevent an increase in the already highburden of energy costs to poor households.

4.10 While consumer preference may exert a decisive influence, thelack of market penetration by charcoal can partly be explained by itsrelatively high user cost. Charcoal is less costly to use than fuelwoodonly when purchased in bulk (large bags), an option not open to amajority of consumers because of cash flow constraints. An additional

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factor which may deter consumers from using charcoal is the cash outlayneeded for purchasir. charcoal stoves.

4.11 Household Incomes and Energy Costs. In the event that improvedwoodfuel stoves fail to penetrate the fuelwood deficit urban areas insufficient numbers, the real cost of cooking energy is likely to continueto rise as a result of increasing fuelwood prices (see discussion in nextsection). The mission's household survey results suggest that a majorityof urban households already spend between 20% and 40% of their incomes onenergy purchases, mainly on fuelwood. Thus, most households do not havethe purchasing power to maintain their fuelwood consumption in the faceof rising fuelwood prices. The only alternative is less cooking, i.e., apainful reduction in basic welfare.

4.12 In urban areas, it is evident that households would be preparedto spend a high proportion of any additional i.icome on increased cooking.The introduction of more efficient stoves would have the same effect asreducing the price ot wood. The incomre mad( available by this pricechange will, to some extent, be spent on increased cooking. Improvementin combustion efficiency, therefore, may not result in a fully commen-surate reduction in fuelwood consumption. While the full cost reductionrepresents a very real improvement in basic household welfare, it isessential that deforestation projections are not rigidly linkeci toimprovements in combustion efficiency.

4.13 Taxes and Subsidies. Fuelwood prices are determined by thecost of cutting and transport and do not include a component for theeconomic cost of the wood itself, i.e., the cost of reafforestation or,in its absence, the cost of deforestation in terms of decreasing soilfertility. While higher taxes on fuelwood would be justified in economicterms, enforcement problems nmoy well prevent the delivered price beingraised up to the level of the full economic cost of supply. Fuelwoodconsumers will, therefore, continue to be indirectly subsidized by aprice distortion. This economic fact of life should be explicitlyrecognized in any discussion of subsidies on stoves or reduced taxes onalternative cooking fuels (kerosene).

Woodfuel Supply and Demand

4.14 Supply and Demand at the National Level. Sierra Leone haslarge and diverse forest resources. According to latest estimates 87% ofthe Sierra Leone's total area (7.2 million ha) is classified as naturalforest land. However, only 5% of land area (365,000 ha) is closed highforest, located largely in the remote eastern part of the country butwith some reserves in the Western Area peninsula near Freetown. The restof the country is now covered in secondary forests in various stages ofdegradation (261,000 ha), forest regrowLh from bush fallow agriculture(3.7 million ha), and savannah woodland (1.7 million ha). There are286,000 ha of mangrove located near Freetown.

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Table 4,4: FOREST RESOURCES AND ANNUAL WOOD INCREMENTS

EstimatedEstimated total

Forest/land type Area annual yield annual yield

(1000 ha) (m3 'ha) ('000 m)

Closed high forest 365 2-4 770-1,500Secondary forests 261 1 260Forest regrowth (bush fallow) 3,774 2-3 a/ 7,500-11,0',0Savannah woodland 1,619 0.4-1.2 600-1,9uOCoastal woodlands (mangrove) 286 0.3-0.6 100-200Plenta'ions 10 3-15 30-150Overall tree cover 6,315 9,260-15,010

a/ For most areas.

Sour.e: FAO/UNDP/MANR Land Bureaus Survey Report (1979), misszon estimates.

4.15 Table 4.4 presents estimates of the annual increment in forest

cover. The total annual increment from all sources is estimated at

between 9 and 15 million cubic meters (n, ) with the bulk of supplies

coming from rorest regrowth that develops as part of the bush fallow

cultivation cycle. Due to the lack of reliable and up-to-date

information on forest inventories and yields, especially from bush

fallow, the estimated total annual incren,ent is only an approximate

measure of sustainable wood supplies.

4.16 Aggregate wood production is well in excess of estimated

fuelwood consumption for the country as a whole. As compared 3with an

annual increment in the natural forest cover of 9-15 million m , total

woodfuel consumption shown in Table 4.5 is around 4 million m3 (or

1.1 m /capita/year), indicating an apparent surplus. 14/. However, in

practice, wood available for consumption is less than annual incremental

supplies. Wood availability depends on economic access to the resour-

ces. In Sierra Leone, significant wood resources are concentrated far

from the large consumption centers in sparsely populated areas which lack

appropriate access infrastructure to exploit the resources economically.

In the case of supplies from bush fallow, economic access is often

limited to 2-5 mile distanuces from transport routes and availability is

low with current prices ar.d existing transport infrastructure.

4.17 In summary there is a physical surplus of wood supplies at the

country level with sustainable physical production exceeding annual con-

sumption. However, such a comparison between physical supply and demand

14/ Other uses o roundwood (including poles and sawlogs) are around

0.2 million m and co not materially affect the physical 5urplus.

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obscures the true extent and nature of fuelwood scarcities, as it doesnot reveal the extent to which supplies are economically available tomeet demand at specific locations. This observation is reinforced byincreasing signs of regional scarcities as discussed next.

Table 4.5: WOODFUEL DEMAND (1986)

Fuelwood Charcoal Equivalen* tuelwood demand

('000 tons) ('000 tons) ('000 tons) b/ ('000 m ) c/

Household a/Freetown 194 24 437 625Other areas ,928 32 29 3,213

2,122 56 2,686 3,838

Industry 5 4 42 61Commer'ce 6 0.5 11 15Tobacco curing 25 - 25 36

Total 2,158 60.5 2,764 3,950

a/ Annual fuelwood (charcoal) consumption per capita. Freetown 400 kg (50 kg); otherareas, 600 kg (10 kg).

b/ Efficiency of converting wood to charcoal, 10% on a weight basis.

c/ Wood density assumed to be 0.7 tons/m3, air dried.


4.18 The Emergence of Regional Scarcities: Causes and Trends. Inspite of an apparent surplus of physical wood supplies at the nationallevel, there are indications of severe and growin.g regional shortagescombined with a deterioration in the size and quality of forestresources. As shown in Annex 19, fuelwood prices in the Freetown areahave increased more than 220% in real terms since 1978 and woodfuelmerchants can be observed travelling more than 100 miles to MoyambaJunction and even beyond Kenema for supplies. Approximacely 60%-70% ofFreetown supplies are now estimated to come from outside the WesternArea. Fuelwood shortages, in the form of active markets and risingprices, have also emerged in the tobacco growing areas (near Makeni andBo) where fuelwood is used by farmers for tobacco curing, as weil as inKenema and Koidu. The effect of regional scarcities is now being felt inrural districts: wood has become a traded commodity and accounts for asignificant proportion of the farmers income (as much as 80% in somevillagec) in catchment areas supplying consumption centers.

4.19 There are three main causes of the destruction of the naturalforest cover and the emergence of regional shortages: (a) urbanizationand over-cutting of wood to supply the large and growing consumptioncenters; (b) forest clearing and degradation associated with the need for

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agricultural land; and (c) lack of commitment to tree protection or forplanting new trees.

4.20 Bad forestry management practices have been triggered byuncertainty about land-holding rights and, therefore, about the long termownership of the forest cover. Moreover, the policing role of theforestry services has reinforced the villagers loss of interest in forestcover protection and development.

4.21 As a combined result of these factors which largely derive frompopulation pressures, there is a continuing erosion of forest cover andshortages continue to magnify. In the Western Area region where theseshortages are most pronounced, a conservative 3.5% per annum increase inthe populatign should raise total w,odfuel demand from its current levelof 650,000 mT to about 1 million m in the year 2000. To generate evenhalf the increased amount from the Peninsula area would require newfuelwood plantations, exceeding 10,000 ha, to be added to the WesternRegions current forest reserves (around 18,000 ha) whose function ismainly protective and cannot be used to meet future demand. 15/

4.22 In spite of the uncertainty in these estimates, it is clearthat there is an urgent need to initiate measures to improve wood supplyand limit demand growth in the Western Area if the shortages are not tomagnify two tc threu fold over the coming 10-15 years. Similar measuresmay be needed in the vicinity of Bo, Makeni, Kenema, and Koidu Town whereprices have been rising, but little is known of the supply-demandbalance.

Househcld Energy/Woodfuel Strategy

4.23 Need for Intervention. The analysis in the previous sectionspoints to the urgent necessity of limiting wood demand growth andimproving supplies in regions where significant woodfuel imbalances haveemerged, especially in the Peninsular area. Without some form of govern-ment intervention, the costs of energy supplies to urban households willcontinue to rise in real terms, and the deterioration of the forest coverwill accelerate, not only in the deficit areas but the rapidly expandingzones which supply the shortfall. A strategy designed to address theseproblems should focus on improving the situation in the worst affectedareas: the Peninsula, as well as the areas around Makeni, Bo, Koidu andKenema. There is also a need for an integrated approach to householdenergy/woodfuel problems: given the country's limited resources, it isboth efficient and desirable to allocate available funds between various

15/ Based on a mean annual increment of 18 m3/ha.

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supply and demand side programs in a manner which maximizes their com-bined impact and encourages the provision of household energy at leastcost.

4.24 In formulating a household energy/woodfuel strategy thefollowing components should be included: (a) actions on demand manage-ment; (b) supply side measures; (c) changes in the institutional frame-work; and (d) evaluation of the potential from other energy sources.Management of Household Demand--The Focus on Fuelwood

4.25 Conserving Woodfuels and Reducing Costs Through Improved WoodStoves. The ,nost common form of cooking is over the traditional openthree stone fires, which have poor thermal efficiencies estimated to bein the range from 8% to 15% according to fire tending practices. Thismethod of cooking is widely used in the rural areas and by more than anestimated 60% of Freetown households. In principal, substantial savingsof fuelwood appear feasible through the widespread use of low cost, moreefficient models of woodstoves. Hence, replacing the three stone stovewith woodstove models that are financially attractive to users and burnless fuelwood must be the focus of any household managoŽment program thatis to have a signifi-ant impact in terms of either overall fuelwooddemand or cookicLg costs for the low income families, who are the mainusers of this technology.

4 26 A comparison of the costs using different stoves shows thesignificant cost savings that can be achijved by switching to moreefficient models currently being tested (Table 4.6). The Louga stove,introduced by Plan International as a pilot project, gives the lowesttotal cost of cooking. The three stone stove is the most expensive touse with total costs being twice the level of the Louga. The Caussanelmetal stove, designed by a French engineer at the University, is alsomore economic than the three stone stove and is now being produced on asmall scale by An NGO (YWCA) and the private sector. However, the costsof purchasing the stove and a lower conversion efficiency, compared tothe Louga make it more expensive to use than the la:ter. Table 4.6 alsoshows that charcoal is more expensive to use than fuelwood, burnt ineither of the improved stoves, even if the consumer buys the charcoal inbulk at an average price of La 0.81/kg. The figures in the table revealthat the use of improved stoves will not only cut the cost of cooking butsubstantially reduce fuelwood consumption. This assumes that all of thesavings are not used by consumers for increased cooking.

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Table 4.6: COMPARATIVE COOKING COST OF ALTERNATIVE STOVES (February 19b6)

Fuel Energy Conversion Stove Annual Annual Annual Tbtal

Cost Content Le/Mj efficiency Cost Cost Fuel s:l

(Le/kg) (MJ/Kg) (S) a/ fLe) (Lifetime) (kg) c/ Le/yr.) (Le/yr.)

Fuelwood Stoves3 stone 0.27 15.10 0.018 11.3% nil nil 2,900.00 756.00 756.00Lougs 0.27 15.10 0.018 22.6% one hour's training 1,400.00 378,00 378.00

in clayworkCaussanel Metal 0.27 15.10 0.018 18.9% 50.00 21.90 1,680.00 453.60 475.50Cylinder

Charcoal StovesTraditional Design 0,81 27.50 2.91 21.1% 33.00 15.33 823.38 658.70 674.03

Kenya Jiko Type 0.81 27.50 2.91 30.0% 70.00 30.66 579.11 463.29 493.94

a/ Efficiencies based on standard water boiling tests at Fourah Bay College and by independent researchers.b/ Stove costs treated as a cost annuity over 3 yers * 15%.c/ Using 400 kg/cap/yr, household size 7, with 3 stone stove; with other stoves fuel use gives equivalent

delivered energy.

Source: Mission estimates and various World Bank documents.

4.27 Based on the above consideration, a specific stove testing anddemonstration program should be designed and initiated under an ImprovedStove Unit (ISU) that should be created within the MEP in its enhancedrole as proposed in the next Chapter. The ISU would be part of an energyconservation division within the MEP. (It is to be noted that there is alack of consensus between the MEP and the MANRF on the issue of thelocation of the ISU. MANRF believes that while responsibility foroverall er.rgy policies, including energy conservation policy, should bevested in MEP, activities rel.ted to traditional energy resources shouldremain with MANRF. In line with this thinking, it believes that the ISUshould be located in the Forestry Division at the MANRF.) The demonstra-tion program should be designed in a manner suitable for funding bydonors. Following a period of stove selection and field testing forconsumer acceptance, a strategy should be devised on the most appropriateway for accelerated dissemination of the stoves selected for theprogram. Initial diffusion efforts should be concentrated in prioritywood deficit areas. Further government sponsored dissemination shouldlead, as quickly as possible, to a self sustaining system with emphesison private sector production and marketing without subsidies. The modeof dissemination will depend on the characteristics of stoves finallyselected for the program. The two t,iain types of stoves currently beingtested will require different approaches for dissemination.

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4.28 The Louga Stove. This is essentially an improved version ofthe three stone stove. It consists of a mud or clay wall built aroundthe pot with a small gap for smoke and draught. In the base is an archedentry for firewood wich a slit for observing the state of the fire.These stoves are more adapted to rural rather than urban areas. In thelatter, consumers generally prefer portable stoves and suitable mud orclay may not be accessible.

4.29 The Caussanel Metal Stove. The metal cylinder stove h.s twomajor advantages over the mud stove. It is portable and it can bediffused through the market by producers who can make and sell thestove. Initially, families have been induced to take the stove and payfor it only if satisfied. The stove diffusion potential has beenincreased by designing it in a manner that allows fabrication by localcraftsmen. In its initial phase, the dissemination program couldencourage sales through subsidies or by extending a line of credit.

4.30 The Experience of Improved Stoves in West AFrica. Untilrecently, improved cookstove projects in West Africa have met with mixedresults. However, several ongoing or just completed programs in Nigerand the Gambia have bee. gauged succes>es because they have been designedto avoid the errors of previous experiences. Past stove projects oftenfailed to take local cooking habits and needs into account, were heavilysubsidized, and/or ignored the existing marketing and distribution sys-tem. The success of recent efforts has been based on the followingelements:

(a) use of scientific testing and design principles, comb:red withan awareness of culinary practices and attitudes, to designstoves that are both efficient and socially acceptable;

(b) optimal pricing of the improved stove so that it has both aquick payback period and yields a sufficient return to theartisan to ensure continued production;

(c) reliance on the existing production and marketing system tomanufacture and disseminate stoves; and

(d) related trairning of artisans, advertising campaigns, and publicawareness ef.orts undertaken by extension workers.

This carefully researched approach is sensitive to local needs, avoidsredundancy in producing and distributing the product, and recognizes theimportance of active promotion in marketing a new producL.

4.31 The Market for Improved Stoves in Freetown. Freetown, withabout 500,000 inhabitants and an average of six persons per family, hasapproximately 80,000 households. Assuming that each household requirestwo cookstoves, and that the life of an improved stove is three years,the market for improved cooking equipment is between 50-60,000 stoves per

89 -

annum. An improved stove program in Freetown should rely primarily onthe private sector, which is already producing metal stoves. Materialcosts (6-8 stoves can be produced from a used oil barrel), productiontime, and profit margins will determine the final asking price for animproved stove: Government or donor input would be needed for design andmarket research, artisanal training, publicity and, most importantly, anappropriate pricing policy for fuelwood. The goal of the program shouldbe to produce and market, on a large scale, affordable improved metalstoves that will reduce household consumption of fuelwood while concomi-tantly satisfying family cooking needs and budgets. No investment by theGovernment would be required in producing these stoves. Also, as theyare produced from locally available scrap metal, no drain on foreignexchange would be involved.

4.32 Other Options for Conservation and Interfuel Substitution.Substitution from fuelwood to charcoal should not be encouraged due tothe large wood equivalent losses incurred in the carbonization process.However, urban demand for charcoal is likely to increase even withoutintervention, as costs of using charcoal relative to fuelwood diminishunder the influence of two factors: (a) a decline in production costsassociated with greater use of more efficient kilns; and (b) the advan-tage that charcoal has over fuelwood in transport costs (due to itshigher energy content per unit of weight) will increase as average trans-port distances increase. As a result, the percentage of Freetown house-holds currently using charcoal (about 25%) will rise. The traditionallocal design of charcoal stoves are about 50% less efficient than char-coal stoves successfully adopted in other countries such as the Thailand"bucket" stove or the Kenyan "Jiko" stove (Table 4.6). Testing for theefficiency, consumer acceptance, and production costs of alternate de-signs should therefore be a near term component of a stove program.

4.33 As in the case of charcoal, substituting from fuelwood tokerosene is not to be encouraged, although for different reasons: theincreased drain on foreign exchange that a subsidy on kerosene wouldinduce. (A subsidy or lower tax on kerosene, relative to other petroleumproducts, will help poor households but also lead to adulteration ofdiesel by kero3ene in the transportation sector, as discussed in ChapterII, thereby weakening the impact on equity and distorting the use ofpetroleum products.) At the same time, the large differentials betweenthe cooking costs of using fuelwood (and charcoal) compared with kerosenepurchased ir. affordable quantities from street vendors (Table 4.3) arelikely to inhibit consumer purchase. However, over time, more middleclass users may be prepared to pay higher costs (as some currently do)for the convenience value of kerosene relative to woodfuels. Thispropensity is likely to increase if fuelwood prices continue rising alongthe trend of the past five years. Efficient use of kerosene shouldtherefore be encouraged. More efficient (but not significantly moreexpensive) alternatives exist compared with the stoves being currentlysold in the market, such as those available in India, and should beconsidered for trials in the stove program.

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4.34 Main demand side recommendations. Demand management measuresshould take a high priority in a household energy/woodfue's strategybecause of the potentially large and !mmediate effect they can have inreducing household energy costs through reduced consumption of wood-fuels. The main elements of a demand management program should be:

(a) Design of a specific program for testing, demonstrating, anddisseminating iinproved wood stoves in the main urban areas ofFreetown, Bo, Kenema, Makeni, and Koidu. A number of stovemodels should be promoted simultaneously as alternatives.

(b) An ISU should be set up (with a multidisciplinary team) tocoordinate the improved stoves program. The ISU should alsoconsider programs for improved charcoal and kerosene stoves.MEP and MANRF should resolve the issue of the location of theISU at an early date.

(c) The Government should seek donor support for: (a) setting upof the ISU; (b) a program for promotion and dissemination ofimproved woods stoves; and (c) design and implementation ofdemonstration target for the manufacture of improved stoves.

Supply Side Measures

4.35 The modest financial and human resources of Sierra Leone'sForestry Service constrains the subsector's investment absorption capa-city. Given this constraint, the government's fuelwood supply strategyshould combine a realistic program of investment in fuelwood plantationswith other measures aimed at: (a) better management and utilization ofexisting forestry resources; and (b) relieving the pressure on forestresources surrounding major urban areas by 1'½entifying and developingalternative sources of supply.

4.36 Establishment of Fuelwood Plantations. An important cption forreducing the pressure on fuelwood prices, especially in the Freetownarea, is the establishment, where feasible, of plantations of fastgrowing trees. The mission's review of earlier proposals by FAO/WorldBank for establishing a 2,000 ha plantation on the Peninsula suggeststhat such a project could supply the Freetown market at the currentwholesale price (of about Le 0.18/kg) and earn an economic return ofilZ. However the costs and yields from the project need verificationthrough actual experience. Some insights in this regard will be obtainedfrom the recently started UNDP/FAO project designed to plant 500 ha offuelwood trees in the Western Region Forest Reserve (and assess theresources of the Peninsula Reserves and coastal mangrove forests) at aforeign exchange cost of $60G,000 and a GOSL input of Le 487,oon.

4.37 In addition to building on the experience of the UNDP/FAOproject, other alternatives and even competing projects and schemesshould be designed and financed in association, where feasibLe, with theprivate sector as well as non-governmental agencies. One example of such

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an approach are proposals for a joint venture between the Forest Serviceand the Rokel Leaf Tobacco Co. for establishing plantations in thetobacco growing areas of Bo and Makeni.

4.38 lmproved Management of Existing Forest Resources. There is anurgent need to foster increased commitment by villagers to protect thenatural fore3t cover in the areas supplying Freetown and in the tobaccogrowing areas. Managed forest areas should be defined and managedwherever possible by the villagers for both soil protection and fuelwoodproduction. Intervention from the forest service should be minimal andshould focus on extension and training, such as protection methods,including fire breaks and early burning/bush fire control. Such a pro-gram would require finding adequate incentives for villagers, and inparticular, giving them as much responsibility as possible for themanagement of the forest cover and ownership of forest products. Landtenure and forest regulations thereQore need to be reviewed to evaluatewhether and how incentives can be strengthened in a practical manner.

4.39 Bush fallow and mangroves are the main sources of fuelwoodsupplies to Freetown (in addition to some limited supplies legally andillegally obtained from the Peninsula complex of forest reserves).However, little is known about the current producLivity of bush fallowsand mangroves and about the exploitation methods used by villagers. In afirst stage, it is therefore essential to develop a better data base onthe role of bush fallows and mangroves for the supply of wood products.In the case of mangrove forests, any data collection efforts should buildon the information detained by the FAO/UNDP project which will also beevaluating the potential of this resource as a project component. Duringa second stage, an extension program should be designed to train farmersto increase productivity from these sources if more effic.ent exploita-tion is feasible and its value can be demonstrated to the farmers. Thismultisectoral and participatory approach requires close coordinationbetween agricultural and forestxry development programs.

4.40 Both the natural forest protection and the bush fallow/mangroveprograms are experimental from a social and technical point of view andshould be carried out as a series of test projects integrated ascomponents of existing cr planned rural development projects.

4.41 Village Tree Plantings. Rural tree plantings by the ForestryService and the NGOs have been underway for several years and it nowneeds to be reoriented and intensified. The Forestry Service has set up,or is the process of setting up, 220 village nurseries as components ofsome of the seven Integrated Agricultural Development Projects (IADP).While these projects are providing significant numbers of seedlings tovillagers for raising multipurpose and fuelwood trees, several fuelwooddeficit areas still have no nurseries for such purposes, including Bo andFreetown. The mission recommends that the Forestry Service create andcoordinate a national network of nurseries at the regional level. TheBank hopes to support the program of establishing village nurseries forboth fuelwood and perennial cash crops (cocoa, coffee, etc.) through its

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proposed Tree Crops/Forestry Project (FY89). These nurseries shouldprovide seedlings at a nominal charge to villagers, but their main focusshould be to train villagers to develop their own nurseries and encouragethem, through appropriate educational/incentive schemes to plant trees.Over time, this should shift responsibility for the tree planting fromthe Forest Service to the local communities, an approach successfullyemployed over the past two years by Plan International in a pilot agro-forestry scheme in the Freetown area.

4.42 Better Management of Supplies to Cities. Given the longer termnature of increasing supplies through tree plantations and village wood-lot schemes, other options should be simultaneously pursued which willpermit an earlier improvement in supplies to the urban areas and protectthe surrounding forest cover. These options, some of which need moredetailed study, include: (a) control of wood exploitation and marketing;(b) transporting wood from surplus areas; (c) developing seasonal s.oragefacilities; and (d) introduction of more efficient charcoal productiontechniques.

4.43 There is an urgent need for the forestry services to bettercontrol exploitation and marketing of fuelwood for consumption in theurban areas. Such a control program should be developed for Freetown asa first priority. The key components of a control program would in-clude: (a) improving the data base on wood exploitation areas andmethods by a survey of main retailers and wholesalers; (b) evaluatingalternatives for providing incentives to direct independent woodloggerstoward wood surplus areas; and (c) the levy and collection of taxes onwoodfuel products entering the urban centers on a commercial basis--using toll posts at the main city entrance. (Given the already highcosts of fuelwood expenditures, relative to income, the levy of asignificant tax is unlikely to be socially acceptable, irrespective ofeconomic justification--the need for prices to reflect the replacementcost of wood gathered as a free good. However, a nominal tax, whichexceeds collection costs, would serve two purposes: (a) it would ?rovideinformation useful for monitoring the supply of woodfuels, and (b) gene-rate funds to augment the meagre resources of the Forestry Services.)

4.44 An important bottleneck for transporting fuelwood supplies isthe lack of a road network to surplus areas. The GOSL should activelyconsider the development of feeder roads to identified surplus areas soas to reduce the pressure on existing supply corridors. This will helpto reduce transportation costs, which account for about 33% of retailprices (Annex 20), and are likely to rise in the future with increases inhaulage distances (as well as the higher expected cost of transportationfuels). Most of the wood comes from supply corridors drawing on thelimited forest cover adjacent to the main roads leading away from thecity. The wood is brought by headload to the roads and from there by

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road transport to Freetown. As the demand for fuelwood has increased,the length of the corridors has increased much more than the width, dueto the absence of a good network of feeder roads leading away from themain highways.

4.45 Contingent on the results of additional market analysis, theGovernment should consider a scheme for stabilizing seasonal prices bypurchasing and storing woodfuel supplies during the dry season andselling them during the wet period when supplies are short. Withoutstorage facilities, supply shortfalls of as much as 50% are experiencedin the rainy season, leading to even larger increases in price. A sLudywould be needed to evaluate how the costs of the scheme (storage plusinterest costs) compare with its benefits to consumers and producers(from a dampening of price fluctuations).

4.46 A significant reduction in fuelwood demand, especially in theFreetown area, could be achieved by the introduction of more efficientcharcoaling techniques. Currently there are only two facilities whichutilize improved technology for charcoal production: a forestry depart-ment kiln, which is not in use now, and a modified "Missouri" kiln opera-tion developed by Dr. Johnson from the University of Sierra Leone. Thelatter operation, run as a commercial enterprise, supplies 60 tons ofcharcoal annually to commercial and institutional customers (such as theUniversity), most of whom previously used modern fuels. The conversiontechnology has a proven efficiency of 25%-30% by weight, more than twoand a half times the traditional methods using earth kilns. (The impli-cation of low conversion efficiency on overall fuelwood demand isunexpectedly significant. The estimated efficiency of 10% for tradi-tionaL charcoaling implies that the estimated 24,000 tons of charcoalconsumed in Freetown (Table 4.5) accounts for 240,000 tons of fuelwood,greater than the direct consumption of fuelwood by hLousehol dS. I f aqu,rter of Freetown's charcoal use could be produced with a 25% effi-ciency, then total woodfuel use in the area would be lowered by about10%. Preliminary estimates by the mission suggest that the operation ishighly profitable. The mission recommends that the Government shouldinitiate a testing and demonstration program for this improvedtechnology.

Main Supply Side Recommendations

(a) Given the resource constraints faced by the Forestry Serviceand the uncertainty about the competitiveness of wood suppliesfrom fuelwood plantations, the viability of such public sectorschemes and their relative priority in a household energy/woodfuels strategy should be reviewed by the Government beforeimplementing new projects. However, because of the importanceof fuelwood to the economy, limited investments should be madein demonstration piantations; these investments would help togive the Forestry Service much needed experience in the

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field. Lower cost options, including agro-forestry schemes, aswell as joint ventures in association with the private sectorshould also be considered.

(b) In a supply side strategy, a high priority should be placed onmeasures for better management and utilization of existingresources and relieving the pressure on forest resources inareas along main roads to urban centers.

(c) For better utilization and management rf existing resources,(i) the Government should define a program of natural forestprotection with increasing management responsibility byvillagers; and (ii) the role of fuelwood supplies from bushfallows should be investigated as the basis for designing amanagement program.

(d) For improving supplies to urban areas, (i) the Governmentshould study the feasibility of city-gate collection ofwoodfuel taxes to be levied on commercial supplies enteringFreetown, (ii) commercial cutting by independent loggers shouldbe directed and controlled, (iii) feasibility of buildingfeeder roads and to transporting fuelwood from surplus areasshould be evaluated, (iv) the coSts and benefits of a schemefor seasonal storage of woodfuel supplies should be started,and (v) a testing and demonstration program for improvedcharcoal kilns should be initiated.

(e) The Government should seek technical assistance from donors toestablish regulatory control over the supply of woodfueis tourban areas. Project components could include evaluation andestablishment of the systems/programs mentioned in (d) above.

Changes in the Institutional Framework

4.47 Despite the importance of household fuels in the country'soverall energy balance, very few formal institutions are involved to anysignificant degree and most of these are associated with the modernenergy forms of kerosene, LPG and electricity. Only the ForestryDivision of the MANRF has any direct operational responsibility thatshould make it an active institution in the household fuels system. Inreality, Forestry's role is quite limited, as discussed below. Little orno formal data collection or planning is done in the woodfuels sector byForestry or any other institutions with broad planning roles such as theMEP and the MDEP. Other institutional issues include the legislative andregulatory framework by which the wood resource base is exploited.

4.48 The Forestry Division. The Forestry Division (now ForestryService) is headed by the Chief Conservator of Forests, who is the prin-8ipal officer charged with carrying out the statutory responsibilitiescovering the government regulated resources (the forest estate protectedforests). This includes the licensing authority under the Forestry

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Legislation and the Wild Life Conservation Act. In reality, there islittle official Forestry activity outside of the forest estates. Whilethe Forestry Division has broad statutory functional responsibility,there are very limited concomitant budgetary resources. The ForestryService collects fees associated with the various licenses describedbelow but has no control over these revenues, which go to the Treasury.

4.49 The Forestry Service's established staff in 1985 consisted ofabout 60 officers (foresters, forest surveyors etc.), some 90 forestrangers in three grades, and over 100 forest guards. Many of the postsare vacant and the staff do not have the necessary complementaryresources of vehicles, spares, etc., to adequately operate in the field.The main problem is a lack of resources rather than staff shortages.

4.50 Forestry's budgetary constraints are severe, with the 1984-1985recurrent budget totaling only Le 1.34 million (US$0.11 million). Thereis, in effect, no development budget. The 1984-85 development budget wasless than 5% of the small recurrent budget. Obviously, there are noresources to do plantation and agroforestry projects, particularly whenthis minuscule budget is compared with the plantation developmentcosts. The 1981-82 to 1985-86 Development Plan contained languagedescribing a forest policy with a commitment to reforestation. To datethere has been no significant implementation of this policy. Anydevelopment activities are dependent on special project financing such asthe recently started UN/FAO Western Area Forestry project. Otherpossible assistance may be forthcoming. For example, the Germangove-nment (FRG) has offered assistance for a forest inventory of ForestIndustry Corporation's (FIC) concession areas in the Gola North Reserveand in the preparation of a subsequent management plan, but this isconditional on the passage of the pending legislation mentioned below.

4.51 Exploitation and Fees. Licenses are granted for timber,fuelwood and minor forest products. Fees and royalzies collected bear norelationship to either the economic or financial value of the resource.as these fees have not been changed since 1962. Under current legisla-tion, changes in these fees require the approval of Parliament; changesproposed in 1976 that would have tripled the charges for the highestclass timber and raised other charges have never been approved. Forestconcessions are only controllable under the general licensing and regula-tory power; there is no explicit authority to require management and/orreforestation plans. In effect, current concessions, including that ofthe FIC, are pure exploitation rights. FIC is a state corporation underthe MTI and hence has no direct links with the Forestry Division. FIC isthe major exploiter of domestic timber resources, and currently processesabout 26,000 cubic meters of roundwood in a milL at Kenema.

4.52 In general, there is a lack of statutory power, regulations,and resources for monitoring and managing the forest resources. Thisweakness has also been noted in reports by various FAO experts. Th3re is

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new legislation proposed that would change the current situation, but ithas not yet become law. This proposed legislation provides requirementsfor forest resource management plans, reforestation, updating of fees,and other authorities and procedures missing in the current statutorybase.

4.53 Land Tenure and Use. Land tenure in Sierra Leone is a mix offreehold tenure, which exists in the Western area, and traditional landownership in the provinces. The lack of formal freehold tenure is oftencited as a problem that constrains development, particularly of fuelwoodor other tree crops. IL is unclear whether this is actually the case.The traditional "ownership" (outside of the Western area) is in the formof chiefdom tenures, but few of the chiefdom authorities retain theeffective power to use/allocate land. Rather, extended family groupshave come to acquire effectively permanent rights of use of land allo-cated to them by the community. This land can be transferred and allo-cated within this extended family unit but is unavailable for realloca-tion to a larger community group while the land is in effective use, suchas periodic use under traditional bush fallow cultivation practices.This quasi-permanent use right extends to the o%ners of econemic treecrops, such as oil palms and coffee tress. The planter is the rEccognizedowner. Presumably, if trees planted for fuelwood can also be accepted asan economic tree, the traditional tenure system would not be a barrier todeveloping fuelwood as a cash crop.

Recommendations

(a) The Forest Service should be strengthened and staff trained inagroforestry and fuelwood production. A higher proportion ofthe staff should be allocated to fuelwood deficit regions andtrained in extension methods.

(b) The GOSL should seek donor support for strengthening of theForestry Service and for key preinvestment studies: (i) designof an action plan to improve the management of bush fallows,and (ii) appraisal of the joint venture proposal with the RokelLeaf Tobacco Co. for establishing fuelwood pJantations in Boand Makeni.

(c) An early passage of the new fcrestry legislation is recommendedin order to greatly improve the statutory basis for forestresource management.

Evaluation of the Potential of Other Energy Sour.es

4.54 Agricultural Residues. Annex 21 shows an estimate of theagricultural crop and animal wastes available annually ,n Sierra Leone.Crop wastes, predominately rice straws and husks account for more thanhalf of the energy potentially available from these wastes. However,these residues are of limited practical value due to their high ashcontent, low bulk density, and high cost. Previous estimates have shown

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that the cost of densifying most crop residues is over $30/ton, ignoringgathering or collection costs. When compared with ehe roadside cost offuelwood, $7.35/ton (assuming roughly equivalent heating values and end-use conversion efficiencies) densifying agricultural residues is anextremely expensive means of providing energy. The residues available atmills can be utilized without densifying. Some agroindustries arealready using their wastes to fire their boil.ers.

4.55 Of the available animal wastes, cow dung represents the biggestpotential energy source. However, this resource is too valuable as asoil nutrient to burn directly. The amount that could be digestedanaerobically is only a fraction of total supply due to the dispersed,free ranging of cattle and hence the difficulty of collecting dung. Thismay be less true in the Northern Region but land ownership and villagelayout, cattle ownership, and management patterns, etc., would need to bestudied to estimate the realistic energy contribution that could be madeby anaerobic digestion systems. Most of the commercial dairies arelocated in the Western Region, where there are also commercial piggeries.A demonstration biogas unit has recently been completed at one of thelatter; such facilities could be commercially viable for substitution ofmodern fuels and electricity, but this is a limited market.

4.56 Lighting needs are a pressing problem as kerosene is extremelyscarce and expensive in rural areas. It is possible that biogas systemscould provide lighting on a household or village basis provided thatdung, water, and organizational support are not constraints. At thistime, one can only speculate on the potential contributions to a varietyof other rural needs that could be provided by residue or wood-poweredtechnologies such as anaerobic digesters or gasifiers. A study thatintegrates rural household and agricultural energy needs in Sierra Leoneshould be a fairly high priority.

4.57 In the short term, the previous discussion strongly suggeststhat various agricultural crops and animal residues are an effectiveenergy source only if they are already concentrated at ag:oindustries(such as saw, sugar or rice mills, oil rPresses, or dairy operations) foruse in process heat and/or auto or rogeneration producing process steamand/or electricity.

4.58 Sawmill Residues. Total milling capacity in Sierra Leone isabout 100,000 m , dominated by the capacity of the FIC at Kenema, whichaccounts for about 40% of this capacity. According to the FIC GeneralManager, the plant operates at 60%-70% capacity and their wastes (slabs,shavings, and sawdust) amount to about 50% of the input. At 65% capa-city, this implies 13,000 m meters of wood waste, all of which is usedin their woodfired power system. No other sawmill uses its wood wastefor genera.ing power. Assuming that the production efficiencies andcapaciti uLilization of the rest of the industry is similar, this would

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imply some 19,500 m3 of woodwas'e available at concentrated points at thesawmills. These resources are possible feedstocks for charcoal produc-tion which could be financially viable for the mill owuLers.

4.59 In addition, there are probably significant field residuesavailable as a result of the cutting practices. No estimates of thisresource are available, but based on experience elsewhere, even if thereis no clear cutting and there is whole tree-cutting, simply the tops leftbehind would represent a considerable resource that could be carbonizedin the field, if this were fInancially viable. In Sierra Leone, onlyabout 70-80 of more than 150 species are considered commercial, and henceonly a portion of the species are harvested. This suggests thatconsiderable other stock must be cut simply to extract the commercialspecies; if this is the case, the field resources could be larger thanthe mill resources. Studies in other countries suggest that thedistances from demand centers range froin 500 kms by truck to over1,000 kms by barge within which this wood waste may be economicallyutilized (if carbonized).

4.60 Ethanol from Sugarcane or Cassava. Domestically producedethanol (alcohol) from cassava or sugarcane can be used either as a sub-stitute for gasoline, or as an additive to enhance the octane value ofgasoline, thereby substituting for the High Octane Blen'ing Component(HOBC) which was, until recently, imported by the refinery (see Chapt'rII). Ethanol is produced through a fermentation process using sugarcaneor cassava as feedstock. A generally mure economic operation is to usemolasses--prod_ced as a by-product in sugar processing--as a low-costfeedstock. The economics of ethanol production are closely tied in withthe cost of the feedstock used in its manufacture and the price ofgasoline.

4.61 Preliminary estimates by the mission suggest that the use ofethanol, either as a gasoline substitute or as a gasoline extender(substituting for HOBC), is not a viable proposition, at least over thenext five years. The small size of the market precludes the use ofethanol as a substitute for gasoline in ethanol dedicated vehi-cles (i.e., vehicles running entirely on ethanol). For the use ofethanol as a gasoline extender, the problem is one of economics. Thecosts of producing the appropriate quality of et .anol (99.5% alcohol,0.5% water) from molasses would make ethanol uncompetitive unless theprice of oil were to exceed $35/barrel. At present levels of sugarproduction, the amount of feedstock (molasses) available for conversionto ethanol, about 4000 tons, also appears to be well below ehe levelswhich would justify investment in ethanol production; at lea-, about50,000 tons of molasses would be required for economic operations.

4.62 Lignite Resources. The presence of lignite has been known inSierra Leone for some time as there are points near the coast in which

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the lignite can be seen at the surface. The main deposits are reportedto be in an area near Yema, some six miles northeast of Waterloo, andwithin possible economic transport distance of the potential demandcenters on the Peninsula. There are deposits reported in other areas,mainly in the coastal regions, but also li. the vicinity of Kenema. Thelignite deposits identified generally are found with overburden depths of35-45 feet covering strata up to 5 feet in thickness. The quality of thelignite (+2,000 BTU/lb.) is mostly at the upper end of the UN's inter-national comparison of lignite heating values, 4,000-8,000 BTU/lb, seeAnnex 22.

4.63 Currently, exploration activity is being carried out by theGeological Survey in the form of a reconnaisance program in the KoyaChiefdom, 25 km from Freetown. Due to equipment limitations--drilling isthrough the use of hand-operated equipment--progress has been slow: only40 square kilometers have been covered in the past 2-3 years. Neverthe-less, the program has proved the existence of about 200,000 tons oflignite and there are indications of a further 300,000 tons. Previousestimates of reserves in the same general area were 2 million tons, butthe reliability of these estimates is unknown.

4.64 The focus of previous work by the Geological Survey has been'imed at identifying deposits of sufficient size to sustain a 20 MW powerplant. However there are possibilities to use lignite at a much smallerscale. A pilot scheme could be conceived at a smaller scale of perhaps5 MW and exploitation for industrial or commercial demands could be doneat an even smaller scale. Previous smali scale exploitation was for asingle industrial facility--a brick kiln--where lignite was sbtained as aby-product in the mining of clay. There are also possibilities to usethe lignite for small household end uses, particularly if briquitted.

4.65 The main problem regarding lignite is the identificatioi ofeconomically viable re-erves, taking account of both extraction andtransportation costs. The reserves identified so far have high stripratios (the amount of overburden divided by the thickness of the seam)which makes exploitation unattractive, except where it has been mined asa by-product. Exploration work should be speeded up through the use ofbetter equipment, especially power drills, so that a better evaluationcan be made of the size and quality of existing resources.

4.66 Solar and Wind. Beyond the annual fluctuations for insolation,measured at eight sites throughout the country, little comprehensiveanalysis of insolation is available. In Freetown, the range variesbetween 308 calories/m2/day to 465 calories/m2/day from August toFebruary. The insolation is below 400 calories/m2/day for about fivemonths each year. With the possible exceptions of hotels, this range ofinsolation implies that solar hot water heaters will be more costly thanusing charcoal boilers. Wind velocities are reported to be low (1-5 m/sec) with short-lived peaks during storms; as such, windmills are notan attractive source of energy.

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Recommendations

(a) It is possible that biomass fuels could substitute forpetroleum products in providing energy for low level processheat in specific applications. The technical anJ economicfeasibility of these possibilities need to be analyzed on acase-by-case basis. This is especially important in view ofthe potentially vast quantities of wood wastes that may beavailable from the clearing of bush fallow land. Energy auditsand process analyses should be undertaken at the factory ormill level to determine if direct conbustion or gasification ofbiomass fuels is an appropriate alternative to currentmethods. The palm oil plant at the Eastern Clinic might be acandidate demonstration plant for appropriately selectedbiomass fuel technologies; one of its oil presses is beingreplaced after being out of operation for two years.

(b) Exploration work for identifying the size, quality, andlocatiorn of existing reserves of lignite should beintensified. The Geological Survey should be provided withbetter equipment and technical assistance to make such aneffort feasible.

Investment and Technical Assistance Program

4.67 In effect, there has not been any official government invest-ment program aimed at household energy. Financing for activities hasbeen provided by bilateral donors and private voluntary organizations.There have been proposals for multilateral financing of agroforestry andother woodfuel-focused projects for some years. The recently initiatedFAO/UNDP project is the first such project to reach the implementationstage.

4.68 Table 4.7 below describes an investment program including thevarious surveys, studies, analyses, and demonstration projects to imple-ment the priority measures for implementing a household survey/woodfuelstrategy over the next five years.

4.69 The total proposed program amounts to $2.3 million. Beginningin 1987, $1 million would be spread over five years to develop two demon-stration 500 ha wood plantations near Freetown in the Western Region.Another $600,000 would be devoted (over two years) to supporting thedevelopment and financing of a variety of stove and biomass conversiontechnologies at the household and producer levels. To improve themanagement of existing resources, the Government could also obtaintechnical assistance for establishing regulatory control over the supplyof woodfuels to urban areas and improving the efficiency of charcoalproduction. The initial phase of such a program would cost about$50,000.

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Table 4.7: Il;4gtbiAENT PROGRAM (1987-91): HOUSEHOLD AND RENEWABLES SECTORS

(USS)

Area of Investment Cost

Stove testing, demonstration, and promotion S 600,000Strengthening of forestry department in areasof agroforestry and extension services S 100,000

Setting up of Improved Stove Unit in Ministry ofEnergy and Power S 400,000

Demonstration plantations Si,OO0,000Technical assistarce for better management ofsupplies to cities S 50,000

Various studies - Lignite technical assistance S 30,000- Alternative uses of biomass S 40,000- Mangrove potential S 30,000- Yields from bush fallo S_ 50,000

Total $2,300,000

4.70 The remaining $650,500 would be used over two years to supportvarious studies including alternative uses of biomass residues, the fuelpotential of lignite and mangrove, fuelwood yields from bush fallowagriculture, and institutional strengthening (incluaing the setting up ofthe ISU at the MEP).

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V. ENERGY SECTOR MANAGEMENT

Introduction

5.1 The report has focused on key issues in the three energysubsectors: petroleum (Chapter II), electricity (Chapter III), andwoodfuels/household energy (Chapter IV). This final chapter looks at theenergy sector as a whole and proposes measures to improve management andinvestment planning in the sector.

5.2 The measures proposed cover: (a) sector organization; and(b) investment planning/management of external assistance.

Energy Sector Coordination and Planning

5.3 The key institutional difficulty facing the energy sector isthe absence of a single Ministry deal.ng with energy matters andresponsible for the formulation of a coherent policy for the sector as awhole. This section considers the problems in the cur-ent institutionalarrangements for coordination and planning and suggests possibleimprovements in this framework.

Problems with Existing Institutional Framework

5.4 Altnough the MEP, created in 1974 in the aftermath of the fihstoil price shock, is in theory responsible for coordinating all energyactivities, its main preoccupation to date has been with electrical powerand water distribution. As already described in Chapter I, there arefive other Government Ministries dealing with specific energy subjects:MOF (pricing and foreign exchange allocation for oil imports); MTI(petroleum supplies, refining, and distribution); MANRF (woodfuels);Ministry of Economic Planning and National Development (reviewing thepriority for energy projects in the national plan); and MOM (petroleumexploration and lignite). There is only a limited amount of coordinationbetween the various ministries and the MEP does not have the political,nandate and status to carry out this function effectively.

5.5 There are numerous problems which arise as a result of theexisting institutional framework. These problems include:

(a) lack of clearly defined energy policy or strategy;

(b) Absence of nat!onal energy planning;

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(c) absence of any system for collecting and disseminatinginformation on the energy supply and demand situation in thecountry;

(d) absence of a training program for developing energy sectorexpertise in the country; and

(e) weak linkages between various ministries dealing with energy,and between the Ministries and the center for research anddevelopment (University of Sierra LeoneJ.

Recommendations

5.6 To overcome the above mentioned problems it is recommended thatthe MEP be given the status and support necessary for coordinatingactivities in the energy sector. To make this proposal effective, theinstitutional responsibility for oil and product imports, refining, andmarketing, which currently rests with the MTI should be transferred tothe MEP. At the same time, the MEP should also assume responsibility foroverseeing conservation policy and programs, including the introductionof more efficient cooking stoves. As already recommended in Chapter IV,an ISU should be sec up within the section or division of the MEP respon-sible for energy conservation. Initially, an NGO, like Plan Interna-tional, could manage the ISU, as it will already have the staff andequipment to direct the cooking stove program within the MEP's policyguidelines. In the longer term, the MEP can take over these responsi-bilities through its own conservation staff. As discussed in Chapter IV,MANRF agrees with these recommendations but has reservations about thelocation of the ISU. The COSL should resolve this issue at an earlydate.

5.7 In order to effectively carry out its role of energy sectorcoordination and planning, the functions of the MEP would include:(a) setting up a reliable data base on the supply and demand for energyand producing energy bulletins on a regular basis; (b) evaluatingimportant energy problems facing the country; (c) national energyplanning; (d) developing a policy/strategy for the eniergy sector;(e) identifying training end manpower needs for the energy sector; and(f) monitoring the performance public enterprises in the sector. Thesefunctions should be the responsibility of a Policy Advisory and Planning(PAP) division within the Minis.cy and reporting directly to the Minis-ter. It is essential that the PAP be given a complement of permanentstaff, including energy specialists, economists, and statisticians. Forcoordinating policy with other ministries dealing with energy matters--MOM (petroleum and lignite exploration), Ministry of Agriculture andNatural Resources (fuelwood), and the MnF (pricing, petroleum imports)--

- 104 -

it is recommended that the PAP should include senior professionals fromthese ministries in its deliberations, either on committees dealing withspecific issues or having staff from other ministries on deputation forspecific periods.

5.8 The mission found wide agreement on the part of Governmentofficials for the need to urgently establish a coordinating body withinthe energy sector, preferably by strengthening MEP. However, and as alsoemphasized by senior officials, the following conditions need to befulfilled to make such a change effective: (a) appropriate resourcesshould be made available to the MEP; (b) MEP should draft a detailedproposal of what its enhanced role would entail and how it plans to carryout its increased responsibilities; and (c) a consensus needs to beestablished at the highest levels of Government (i.e., within theCabinet) for such a change, esperially as it will involve, as envisaged,a transfer of responsibilities for the important petroleum portfolio .-romthe MTI to the MEP.

Investment Planning/Aid Coordination

5.9 InvestmenL planning in Sierra Leone should treat forestry,petroleum, and electricity as components of one sector, the energysector. This would assist political decision makers to focus on theallocation of resources both between broadly defined sectors (agricul-ture, energy, health and education) and within the energy sectoritself. Such a decision would also aid the Government in its discussionswith donors.

Availability of Funds

5.10 Gross fixed investment in Sierra Leone was estimated to be ofthe order of 310 million Leones in 1984 (Bank estimates). Public invest-ment accounted for approximately 80% of the total and an estimated 90% ofpublic investment was financed by donors. These statistics underline theimportance of good investment planning in the public sector and the needto make the best use of external resources.

5.11 During 1981-84, the energy sector accounted for approximately10% of both public sector investmant and external assistance used forfinancing public investment. Most (90') of energy sector investment wasdirected towards power, mainly the initial civil works for the Bumbunadam. The rest of the energy sector investment was allocated to projectsfor afforestation and charcoal production. Since a significant amount ofexternally funded public investment has been in integrated rural develop-

- 105 -

ment projects, which have some energy components, it is assuriied thattotal energy investment was in the range of 10-12% of total investmentfinanced by external assistance.

5.12 The mission projected total fixed public investment over thefive years from 1986 at between Le 1.5-2 billion in 1984 Le. This isequivalent to an annual growth rate of 0 to 4%. If the energy sectorretains a 10% share of this total, the investment resources availablewould lie in the range of Le 150 to 200 million. This range is equi-valent to $60-$80 million in 1984 dollars, using the average 1984exchange rate of Le 2.50/dollar, or approximately $65-80 million in 1986dollars.

Investment Requirements

5.13 The mission has proposed a fuelwood program of around$2.3 million over five years 01987-1991) and has estimated that powerinvestment requirements will be between $24 million (BC scenario withBumbuma commissioned in 1997) and $100 million (under an AG world withBumbuma commissioned in 1993). In the case of petroleum, the investmentrequirements, including outlays for exploration promotion, energyconservation measures at the refinery, and increases in crude stocks areestimated to total $2.55 million. The mission's assessment of require-ments is outlined in Table 5.1.

Table 5.1 ENERGY SECTOR PUBLIC INVESTMENT REQUIREMENTS, 1987-9i(in millions of 1986 S)

Scenario AG BC

1. Fuelwood related 2.3 2,3

2. Petroleum 2.55 2.55

3. Power(i) AG Scenario !00.0

(Rehabilitation & Bumbuma)

(ii) BC Scenario 24.0(Mainly R,habilitation)

Total 104.85 28.85


5.14 The mission estimates of requirements for the coming 5 years inthe AG scenario is substantially greater than levels estimated inpara 5.10 above, representing the sector's historical share (over thepast 4-5 years) of total public investment. Under the BC (or alterna-

- 106 -

tively if investment in Bumbuma is deferred), investment requirementswill be well below the historical share. However, even under the AGscenario the share of energy sector investment in aggregate investment inSierra Leone (between 13% and 18%), while significant, will be well with-in the range experienced in developing countries in the early 1980s(between 10% and 25%). In either case, the plans represent a necessaryminimum consisting of: (a) investments which are urgently required suchas the rehabilitation program for NPA; (b) the least cost options 'ormeeting electricity load growth in existing centers (Bumbuma under AG);and (c) fuelwood related inve3tments which are at a minimum level to pre-vent an increase of shortages near urban centers. These remarks shouldbe read in the context of the discussions in Chapter III on the macro-economic implications of the Bumbuna scheme and the constraints onfinancing the project.

Aid Coordination and Monitoring

5.15 The absence of effect4ve systems of coordination and monitoringof aid is a source of weakness which has adversely affected both pro-gramming of aid and its utilization. One difficulty is the practice ofsectoral ministries preparing projects and conducting negotiations forassistance for them with the donors directly, without reference to theMDEP, with the result that MDEP cannot fulfill its role of a centralplanning agency or its responsibilities for prepnration and overseeingimplementation of the annual development budget effectively. Inparticular, the counterpart local finance requirements of donor assistedprojects cannot be adequately foreseen and provided in the developmentbudgets.

5.16 One result of deficiencies in aid coordination has been con-centration of aid (with its accompanying concentration of counterpartdomestic resources) on some subsectors (for example, electrical power forurban areas) and neglect of others which are just as important fornational development as the areas of concentration such as fuelwood.Effective coordination and monitoring of aid through liaison betweenMDEP, the sectorai ministries, and the donor agencies should ensurebetter distribution of external and domestic resources in accordance withthe priorities of national development.

5.17 The Government recognizes the value of direct contacts betweenthe sectoral ministries and the donors--for identification of aidneeds. An Aid Coordination and Monitoring Division is to be establishedwithin MDEP; it is to be headed by a senior officer who will reportdirectly to the Minister. The Division will serve as the Secretariat ofthe Cabinet Committee and will also establish appropriate relationshipswith the sectoral ministries and parastatals on the one hand and the

- 107 -

donor agencies on the other to relate existing and anticipated aidresources with the needs and priorities of national development. One ofthe first tasks of the Division will be to establish a data bank onexternal aid, to serve as an important tool for programming its utili-zation. Technical assistance to establish the Division on a soundfooting, and to institute appropriate operating procedures for it, is tobe provided by the FRC. UNDP is to assist MDEP in reviving its libraryand establishing a documentation center. The miF31on strongly endorsesthese ideas and would urge their early implementation. The mission wouldalso like to suggest an energy sector aid/donor coordination meeting tobe arranged in collaboration with MDEP as a follow up to the energyassessment.

- 108- Annex IPage 1 of 4

ECONOMIC SCENARIOSBASE CASE SCENARIO

(all figures are % of annual average Increment, except where indicated)

Key Assumptions 1986 1987 1988 1989 1990 1990-95 1995-2000 2000-2020

GOP growth (total economy) 0 0 0 0 0 2 2-3 2-3

(official economy) (-2) (-2) (-2) (-3) (-3) (1-2)

Sectoral Growth Rates (total economy)Manufacturing I I I i 1 3

Mining -2 -2 -3 -3 -3 1-2- of which Rutile 0 0 -1 -1 -1 2- f " Diamonds -3 -3 -4 -4 -4 -I

-t t Iron Ore 0 0 0 0 0 0- " i Bauxite 0 0 -I 01 -1 2

Services -1 -1 -I -1 -1 2Agriculture 0 0 0 0 0 1-2Transport 0 0 0 0 0 2

Inflation Rate 100 100 100 100 100 60-70

Budget Deficit (% of GDP) 15 15 15 15 15 10

Coal prices (S/metric ton, DIF, Freetown)1995 2000

Current prices 52 53.4 58.2 62.3 69.3 89.2 108.5

Real, 1986 S 52 50 51 51 53 56 56

Crude Oil Prices - Avg. OPEC1995 2000

Current prices 20 22 22 22 23 39 48Real, 1986 S 20 20.6 19.3 18.0 17.6 24.5 25

Fuel oil prices (S/metric ton) CIF, Freetown

Current prices 119 130.7 131.8 132.5 139.1 228.2 282.8Real, 1986 S 119 122.4 115.5 108.5 106.3 143.3 146.0

Alternate Crude Oil Prices (S/bbl)1995 2000

Current prices 10 10 10 12 13 30 40Real, 1986 S 10 9.4 8.8 9.8 9,9 18.8 20.6

Alternate Fuel o;l prices (S/metric ton)1995 2000

Current prices 65.6 66.6 67.5 78.8 85,1 179,5 237.1Real, 1986 S 65.6 62.4 59 64.5 65.1 112.8 122.4

- 109 - ~~~Annex I- 109 - Page 2 of 4

ACCELERATED GROWTH SCENARIO(all figures are % of annual average increment, except where indicated)

Key Assumptions 1986 1987 1988 1989 1990 1990-95 1995-2000 2000-2020

GDP growth (for whole economy - 0 2 4 5 5 5-6 4-5 4-5

recorded plus unofficial)

Sectoral Growth Rates (total economy)

Manufacturing 2 3 5 6 6 6

Mining 3 5 4 4 4 3--4

- of which Rutile 4 4 4 4 4 4

- " " Diamonds 5 5 4 3 3 2If iX t Iron Ore 0 0 0 0 0 0

to of Bauxite 4 4 4 4 4 4

Services 2 2 3 3 3 3-4

Agriculture 3 4 4 4 4 4-5

Transport 0 2 3 4 4 5-6

inflation Rate 100 60 30 20 20 10-15

Budget Deficit (% of GDP) 15 10 8 6 6 5

Coal prices (S/metric ton, DIF, Freetown)

1995 2000

Current prices 52 53.4 58,2 62,3 69,3 89,2 108,5

Real, 1986 S 52 50 51 51 53 56 56

Crude Oil Prices - Avg. OPEC

1995 2000

Current prices 20 22 22 22 23 39 48

Real, 1986 S 20 20.6 19.3 18.0 17,6 24.5 25

Fuel oil prices (S/metric ton) CIF, Freetown

Current prices 119 130.7 131.8 132.5 139.1 228.2 282.8

Real, 1986 $ 119 122.4 115.5 108.5 106.3 143.3 146

Alternate Crude Oil Prices (S/bbl)

1995 2000

Current prices 10 10 10 12 13 30 40

Real, 1986 S 10 9,4 8.8 9.8 9.9 18.8 20.6

Alternate Fuel oil prices (S/metric ton)

1995 2000

Current prices 65.6 66.6 67.5 78.8 85.1 179.5 237.1

Real, 1986 S 65.6 62.4 59 64.5 65.1 112.8 122.4

- 110 - Annex 1Page 3 of 4

Scenario I: Accelerated Growth

This optimistic scenario outlines a world where Sierra Leoneactively pursues a policy of structural reform along the linesrecommended by the IMF and the World Bank. A floating of the exchangerate in 1986 is accompanied by the removal of subsidies on some productsincluding petroleum and rice. Overall electricity tariff prices areraised by about 300% in real terms over a 3-year period to bring themmore in line with operating costs. The Government cuts its subsidies topublic enterprises and takes limited steps towards privatization. Thisis accompanied by a program granting more autonomy to public enterprisesin pricing, investment, and personnel decisions. Recurrent expenditureson wages and salaries is reduced by 15-20% in real terms over the nexttwo years primarily through reduced overstaffing. Finally developmentexpenditures are focused on core sectors (including energy) for bringingabout a sectoral adjustment of the economy.

Gaijus from the reform program do not reveal themselves quicklybut pave the way for a sustained recovery. The recovery is led byincreases in agricultural output which also contribute to exports.Mineral outputs do not increase significantly over current levels exceptfor gold whose exports in the 1990s gives a major stimulus to theeconomy.

Scenario II: Base Case Scenario

This scenario describes a world where the Sierra LeoneGovernment carries out only a limited set of reforms in response to thepresent crisis but they come too late (early 1990s). Thus the paralysisin the key sectors of the economy continues through to the end of the1980s with the country muddling through, usinig ad hoc measures to avertdisasters.

In this scenario, the proportion of the economy which is"undergroLnd" increases further. Increasing proportions of exports andimports transactions take place at the parallel market rate. Tnusdevaluation takes place de facto as this proportion increases. However,the paralysis in the government's management of the economy continuespartly because of the lack of foreign exchange at its disposal aud partlybecause of the disincentives caused by official control on prices wherethe government can enforce price controls; for example on electricitytariffs, ex refinery prices of petroleum products and prices ofagricultural products. Gverstaffing, lack of autonomy, and low wagescontinue to exacerbate management problems in the public enterprises.

The lack of foreign exchange forces the government to repudiatesome of its debt servicing commitments, leading to a situation whereimports are strictly limited by export earnings -- both official andunofficial.

Annex 1- 111 - Page 4 of 4

Supply constraints (including lack of imports), thedisincentive effects produced by subsidies and distorted prices, and adhoc (crisis) management of the economy prolongs the current economicstagnation through to the end of the 1980s. Political problems arisingout of deteriorating standards of living force the government to carryout limited economic reforms in the early 1990s, which brings about aslow turn around of economic activity by the middle of the next decade.

- 112 -

Annex 2Pasg 1 of S

ENERGY BALANCE IN FPYSICAL UN!TS, 19?4

(Thousand Metric Tons a/)

Primary Energy Secondary Energy

Petroleum Products

Crude Electri- Gaso- Kero- Jet Fuel

Fugiwood Oil Charcoal city LPG line sone Fuel Dlesel Oil Total

(GWh)

Gross Supply

Production 2685.1 0.0

Imports 235.7 3.5 10.8 14.3

Primary Exports 0.0

Stock Changes -14.4 0.0 -0.7 -1.4 -0.5 -7.1 -13.5 -23.2

Total Available 2685.1 221.3 0.0 2.8 -1.4 -0.5 3.7 -13.5 -8.9

Conversion

Petroleum RefIning 221.3 0.9 35.4 29.1 11.9 77.7 56.1 211.1

Power Generation 235.8 -38.4 -23.8 -62.2

Charcoal Production -602.0 60.2

Conversion Lossos

Trans. & Dis. Losses 11.2

Net Supply Avallable 2083.1 60.2 224.6 0.9 38.2 27.7 11.4 43.0 18.0 140.0

Secondary Exports -12.8 -12.8

Bunker Sales -5.7 -5.1 -106

FInal Domestic Consumption 2083.1 60.2 224.6 0.9 38.2 27.7 11.4 37.3 0.9 116.4

Agriculture/Fishing 7.2 '.2

Mining/Quarrying 83.9 7.3 7.3

Industry/Comercial 55.4 6.2 90.4 0.1 0.9 16.2 0.9 18.1

Transportation 38.2 11.4 6.6 56.2

Households 2027.7 54.0 50.3 0.8 26.8 27.6

a/ The exception Is electricity, which is in Gwh.

Source: Mission Estimates

- 113 -

Annex 2Page 2 of 5

tNERGY BALANCE IN TONS Of OIL EQUIVALENT, 19U(Thousand TOE)

Primary Energy Secondary EnergyPetroleum Products

Crude Eloctri- Gaso- Kero- Jet Fuel LineFueiwood Oil Charcoal city LPG line sene Fuel Diesel Oil Total Total

ass Supply

Production 947.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 947.7imports 0.0 235.7 0.0 0.0 0.0 3,6 0,0 0.0 10.8 0.0 14.4 250.1PrImary Exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Stock Changes 0.0 -14.4 0.0 0.0 0.0 -0.7 -1.4 -0.5 -7.1 -12.7 -22.5 -36.9Total Available 947.7 221.3 0.0 0.0 0.0 2.9 -1.4 -0.5 3,7 -12.7 -8.0 1160.9

nversion

Petroleum Refining 0.0 -209.4 0.0 0.0 1.0 36.4 29.4 12.1 77.7 52.8 209.4 0.0Power Generation 0.0 0.0 0.0 60.8 0.0 0.0 0.0 0.0 -38.4 -22.4 -60.8 0.0Charcoal Production -39.0 0.0 39.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Conversion Losses -173.5 -11.9 0.0 -40.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -226.3Trans. & Dis. Losses 0.0 0.0 0.0 0.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.9

Nel Supply Available 735.2 0.0 39.0 18,9 1.0 39.3 28.0 11.6 43.0 17.7 140.6 933.7secondary Exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -12,0 -12,0 -12.0Bunker Sales 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -5.7 -4.8 -10.5 -10.5

nal Domestic Consumption 735.2 0.0 39.0 18.9 1.0 39.3 28.0 11.6 37.3 0.8 118.0 911.1

Agriculture/Fishing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7,2 0.0 7.2 7.2

Mining/Quarrying 0.0 0.0 0.0 7.1 0.0 0.0 0.0 0.0 7.3 0.0 7.3 14.4Industry/Commercial 19.6 0.0 4.0 7.6 0.1 0.0 0.9 0.0 16.2 0.8 18.1 49.2Transportation 0.0 0.0 0.0 0.0 0.0 39.3 0.0 11.6 6.6 0.0 57.5 57.5Households 715.7 0.0 34.9 4.2 0.8 0.0 27.1 0.0 0.0 0.0 27.9 782.8

xurce: Mission Estimates

- 114 -Annex 2Page 3 of S

ENERGY BALANCE IN TONS OF OIL EQUIVALENT, 1975

(Thousand TOE)

Primary Energy Secondary EnergyPetroloum Products

Crude Electri- Gaso- Kero- Jet Fuel LlneFuelw(od Oil Charcoal city LPG lin. sene Fuel Diesel Oil Total Total

Gross SupplyProduction 784,7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 784.7

Imports 0.0 203.6 0.0 0.0 0.0 13.4 0.0 0.0 O.C 0.0 13.4 217.0

Primary exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Stock changes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total available 784.7 203.6 0.0 0.0 0.0 1,4 0.0 0.0 0.0 0.0 13.4 1001.7

ConversionPetroloum refining 0.0 -194.0 0.0 0.0 0.0 30.6 20.4 13.4 66.9 62.8 194.0 0.0

Power generation 0.0 0.0 0.0 47.7 0.0 0.0 0.0 0.0 -25.1 -22.6 -47.7 0.0

Charcoal proauction -32.3 0.0 32.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Conversion losses -143.7 -9.6 0.0 -31.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -184.9

Trans. & Dis. losses 0.0 0.0 0.0 -1.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -1.8

Net supply available 608.8 0.0 32.3 14.3 0.0 44.0 20.4 13.4 41.8 40.2 159.7 815.0

Secondary exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -35.2 -35.2 -35.2

Bunker sales 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -3.0 0.0 -3.0 -3.0

Final Domestic Consumption 608.8 0.0 32.3 14.3 0.0 44.0 20.4 13.4 38.8 5.0 121.5 776.8

Agricuiture/fishing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Mining/quarrying 0.0 0.0 0.0 5.8 0.0 0.0 0.0 0.0 14.3 0.0 14.3 20.1

Industry/commercial 16.2 0.0 3.3 5.1 0.0 0.0 0.7 0.0 20.0 1 ; 22.4 -;7.0

Transportation 0.0 0.0 0.0 0.0 0.0 44.0 0.0 13.4 4.5 3.3 65.1 65.1

Households 592.6 0.0 28.9 3.4 0.0 0.0 19)7 0.0 0.0 0.0 19.7 644.5

Source: Mission estimates

- 115 -

Annex 2Page 4 of 5

ENERGY BALANCE, ACCELERATED GROWTH SCENARIO, 1995(Thousand TOE)

Primary Energy Secondary EnergyPetroleum Products

Crude Electri- Gaso- Kero- Jet Fuel LinoHydro Fuslwood Oil Lnarcoal city LPG line sena Fuel Diesel Oil Total Total

Gross Supply

ProductIon 17.4 1106j8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1124.2Imports 0.0 0.0 334.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 349.9PrIoary Exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Stock Changes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total Availablo 17.4 1106.8 334.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1459.1

Conversion

Petroleum Refining 0.0 0.0 -315.3 0.0 0.0 1.4 63.6 38.1 16.5 110.7 85.0 315.3 0.0Power Generation -17.4 0.0 0.0 0.0 67.3 0.0 0.0 0.0 0.0 -30.7 -19.2 -49.9 0.0Charcoal Production 0.0 -50.7 0.0 50.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Conversion Losses 0.0 -161.2 -19.6 0.0 -33.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -214.4Trans. & Dls. Losses 0.0 0.0 0.0 0.0 -2.9 0.0 O.J 0.0 0.0 0.0 0.0 0.0 -2.9

Net Supply Available 0.0 894.9 0.0 50.7 30.8 1.4 63.6 38.1 16.5 80.0 65.8 265.4 1241.8Secondary Exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -48.2 -48.2 -48.2Bunker Sales 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -6.1 -13.2 -19.3 -19.3


AgrIculture/Fishing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0o. 0.0 0.0 0.0 0.0MIning/Quarrying 0.0 0.0 0.0 0.0 6.4 0.0 0.0 0.0 0.0 11.9 2.8 14.7 21.1Industry/Commrcial 0.0 19.5 0.0 3.2 15.0 0.3 0.0 1.9 0.0 48.4 1.6 52.2 90.8Transportation 0.0 0.0 0.0 0.0 0.0 0.0 63.6 0.0 16.5 13.6 0.0 93.7 93.7Households 0.0 875.4 0.0 46.5 9.4 1.1 0.0 36.2 0.0 0.0 0.0 37.2 968.5

Source: Mlssion Estimates

- 116 -

Annex 2Page 5 of 5

ENERGY BALANCE, BASE CASE SCENARIO, 1995(Thousand TOE)

Primary Energy Secondary Energy

Petroleum ProductsCrude Electri- Gaso- Kera- Jet Fuel Line

Fuelwood Oil Charcoal city LPG line sene Fuel DiOesel Oil Total Total

Gross Supply

Production 1196.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 119S.9Imports 0.0 249.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 249.1Primary Exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 n,o 0.0 0.0 0.0 0.0Stock Changes 0.0 0.0 0.0 n.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total Available 1198.9 249.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00 0.0 1448.0

Conversion

Petroleum Refining 0.0 -235.8 0.0 0.0 1.1 48.7 29.5 11.9 81.6 63.1 235.8 0.0

Power Generation 0.0 0.0 0.0 66.1 0.0 0.0 0.0 0.0 -24.4 -41.7 -66.1 0.0

Charcoal Production -40.5 0.0 49,5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Conversloti Losses -220.6 -13.3 0.0 -43.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -277.3

Trans. & Dis. Losses 0.0 0.0 0.0 -2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -2.0

Net Supply Available 928.8 0.0 49.5 20.7 1.1 48.7 29.5 11.9 57.2 21.4 169.7 1168.7

Second4ry Exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -7.9 -7.9 -7.9Bunker Sales 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -4.4 -9.5 -13.9 -13.9


Agriculture/Fishing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Mining/Quarrying 0.0 0.0 0.0 5.3 0.0 0.0 0.0 0.0 9.2 2.8 12.0 17.3Industry/Commercial 14.1 0.0 3.0 9.0 0.2 0.0 1.5 0.0 35.6 1.1 38.5 64.6Transportation 0.0 0.0 0.0 0.0 0.0 48.7 0.0 11.9 8.0 0.0 68.6 68.6Households 914.7 0.0 46.5 6.4 0.8 0.0 28.0 0.0 0.0 0.0 28.8 996.5

Source: Mission Estimates

Annex 3

RETAIL PETROLEUM PRODUCT PRICES

1975 1976 1977 1978 1979 1980 1981 1982 1903 1984 1985

Gasoline Current, Le/IG 1.15 1.28 1.52 1.51 1.63 2.87 3.00 3.00 4.00 6.38 8.00Index based on constant 1975 Prices 100.0 95.0 101.0 93.3 83.0 131.6 118.1 85.1 66.9 64.1 53.6

Kerosene Current, Le/IG 0.69 0.77 0.97 1.00 1.12 1.64 1.71 1.71 2.11 2.96 4.00Index based on constant 1975 prices 100.0 95.2 107.4 102.9 95.1 125.3 112.2 80.9 58.8 49.5 44.6

Gasoil Current, Le/IG 0.87 0.97 1.00 1.03 1.12 1.60 1.66 1.66 2.83 5.01 7.00Index based on constant 1975 prices 100.0 95.1 87.8 84.1 75.4 97.0 86.4 62.3 62.6 66.5 61.9

At Refinery Gate

Fuel oil Current, Le/IG 0.40 0.44 0.44 0.45 0.5 0.66 0.70 0.70 1.68 3.00Index based on constant 1975 prices 100.0 93.2 84.5 79.4 75.3 87.1 79.0 56.9 33.6 48.6 57.9

CPI 1975 = 100 100.0 117.2 130.8 140.8 170.7 189.6 220.b 306.4 519.9 865.9 1296.9

Annez 4Page 1 of 2

CRUOE OIL AND PRODUCT PRICE FORECAST(Scenario I)

(All figures USS/barrel unless indicated otberwise; Arab Light crude

Current (nminal) crude prices Gross Refining H.S. Fuel Oil NNE RetiNery Yields

Inflation Ocean fre Ight argin as % Price

FOB Fuel Non-Fuel CIF Real Current CIF crud Reffgate HSFD MOGAS GASOIL TOTAL

1986 5.0% 20.00 0.29 0.60 20.89 1.50 1.50 80.0t 16.71 30.01 2B.0% 37.01 95.01

1987 5.0% 22.00 0.31 0.63 22,94 1.50 1.58 80.0% 18.36 29,5% 28.5% 37.01 95.0

1966 5.0% 22.00 0.31 0.66 22.96 1.75 1.65 80.0% 18.38 29.0% 29.0% 37.0% 95.0%

1969 5.0% 22.00 0.31 0.69 23.01 2.00 1.74 60.0% 18.41 28.51 29.5 37.0% 95.0%

1990 5., 23.00 0.33 0.73 24.06 2.00 1.82 80.0% 19.25 28.0% 30.0% 37.0% 95.0%1995 5.01 39.00 0.56 0.93 40.49 2.00 2.33 80.0% 32.39 25.5% 32.51 37.0% 95.0%

2000 5.0% 48.00 0.69 1.19 49.67 2.00 2.97 80.0% 39.90 23.0% 35.0% 37.0% 95.0%

NWE Retinery Gate Prices WiE REFINERY GATE PRICES USS/tonne

Differential Differential Differential Current (Nominal)

MOGASAGASOIL GASOIL M1S KERD/"SOI JET/KERO .355F5OASFSO .35FD HSFD GASOIL MOGAS JET/KERO .3SFD

1986 -4.0t 27.20 26.11 5.0% 28.56 8.01 18.05 109.61 203.94 222.24 224.84 120.92

1987 -4.0% 29.68 28.50 5.0% 31.17 8.0S 19.82 120.41 222.59 242.56 245.40 132.84

1988 -4.0% 29.76 28.57 5.0% 31.25 8.0% 19.85 120.58 223.19 243.22 246.07 133.02

1989 -4.0% 29.85 28.66 5.0% 31.34 8.0% 19.88 120.75 223.85 243.93 246.79 133.21

1990 -4.0S 31.14 29.90 5.0% 32.70 8a0% 20.79 126.26 233.53 254.49 257.47 139.29

1995 -4.0% 50.67 48.64 5.0% 53.20 8.0% 34.98 212.48 379.94 414.03 418.88 234.41

2000 -4.0% 61.85 59.38 5.0% 64.94 8.0t 43.09 261.74 463.80 505 41 511.34 2U8.75

Ocean Freight to CIF FREETOWNUSS/tonne Export Parity CIF FREETOW Le/tonne

Freetown Current (nominal) ex-freetown Exchange Current (Nominal)

Fuel Non-fuel Total HSFO HSF(OS) GAS3IL MOGAS JETAKERD .3X$O Le/S HSFO GASOIL NOGAS JETAERO

1986 2.14 9.00 11.14 119.64 119.00 215.08 233.38 235.98 111.92 12.00 1428 2S61 2801 2632

1987 2.36 9.45 11.81 130.04 130.7C 234.39 254.37 257.21 123.39 18.50 2418 4336 4706 4751

1988 2.36 9.92 12.28 131.63 131.80 235.47 255.50 256.35 123.10 22.90 3018 5392 5651 5916

1989 2.36 10.42 12.78 132.25 132.50 236.62 256.71 259.37 122.79 26.10 34516 6176 6700 615

1990 2.46 10.94 13.40 138.32 139.10 246.93 267.89 270.87 128.35 29.70 4131 7334 7956 6045

1995 4.18 13.96 18.14 226.81 226.20 396.08 432.17 437.02 220.45 39.110 9082 15144 17200 17394

2000 5.14 17.82 22.96 282.40 262.80 486.76 528.38 S34.30 270.93 39.00 1125S 19373 21029 21265

Annex 4Page 2 of 2

CRUDE OIL AND PROODCT PRICE FORECAST(Scenario 11)

(All figures USS/barrel unless indicated otherwise; Arab Light crude

Current (nominal) crude prices Gross Refining H.S. Fuel Oil ME Refinery YieldsInflation Oceon freight -Margin as S Price

FOB Fuel Non-Fuel CIF Real Current CIF crude Refgate HSFD NOGAS GASOIL TOTAL

1986 5.05 10.00 0.14 0.60 10.74 1.50 1.50 80.0% 8.59 30.0% 28.0% 37.0% 95.0%1987 5.0% 10.00 0.14 0.. 3 10.77 1.50 1.58 80.0% 8.62. 29.5% 28.5% 37.0% 95.0%1988 5.0% 10.00 0.14 0.66 10.80 1.75 1.65 80.0% 8.64 29.0% 29.0% 37.0% 95.0%1989 5.0% 12.00 0.17 0.69 12.87 2.00 1.74 80.0% 10.29 28.5% 29.5% 37.0% 95.0%1990 5.0% 13.00 0.19 0.73 13.92 2.00 1.82 80.0% 11.13 28.0% 30.0% 37.0% 95.0%1995 5.0% 30.00 0.43 0.93 31.36 2.00 2.33 80.0% 25.09 25.5% 32.5% 37.0% 95.0%2000 5.0% 40.00 0.57 1.19 41.76 2.00 2.97 80.0% 33.41 23.0S 35.0% 37.0% 95.0%

NWE Refinery Gate Prices WAE REFINERY GATE PRICES U/SStonneDifferential Differential Differential Current (Nominal)

MOGAS/GASOIL GASOIL MOGAS KERO/GASOI JET/KERD .35SFO~HSFSO .35FD HSFD GASOIL MOGAS JET/KERO .3SFD I.

1986 -4.0% 15.13 14.5 5.0S 15.89 8.0% 9.28 56.38 113.45 123.63 125.06 62.201987 -4.0% 15.24 14.63 5.0% 16.00 8.0% 9.31 :6.54 114.24 124.50 125.95 62.571988 -4.0% 15.35 14.73 5.0% 16.12 8.0% 9.33 56.70 115.09 125.41 126.88 62.571969 -4.0% 17.86 17.15 5.0% 18.76 8.0% 11.12 67.52 133.96 145.96 147.69 74.491990 -4.0% 19.18 18.41 5.0% 20.14 8.0% 12.02 73.03 143.83 156.74 158.58 80.561995 -4.0% 40.01 38.41 5.0% 42.01 8.0% 27.09 164.57 300.05 326.97 330.80 181.562000 -4.0% 52.47 50.37 5.0% 55.10 8.0% 36.0B 219.15 393.47 428.78 433.80 241.77

Ocean Freight to CIF FREETOWNUSS/tonne Export Parity CIF FREETOWN Le/tonneFreetown Current (nominal) ex-Freetown Exchange Current (Nominal)

Fuel Non-fuel Total liSFO VSF (B)- GASOIL MOGAS JET/KERO .35FO Le/S HSFO GASOIL MOGAS JETAERO

1986 1.07 9.00 10.07 65.44 65.60 123.52 133.70 135.15 53.20 12.00 1428 1462 1604 16221987 1.07 9.45 10.52 66.01 66.60 124.77 135.02 136.48 52.92 18.50 2418 2306 2496 25251988 1.07 9.92 10.99 66.60 78.50 126.08 136.41 137.88 52.63 22.90 3018 2887 3124 31571989 1.29 10.42 11.70 78.05 84.80 145.66 157.68 159.39 64.07 26.10 3458 3802 4116 41601990 1.39 10.94 12.33 84.13 80.10 156.17 169.07 170.91 69.62 29.70 4131 4638 5021 50761995 3.21 13.96 17.18 180.03 111.50 317.22 344.14 347.98 167.60 39.80 9062 12625 13697 1364920C0 4.29 17.82 22.11 239.05 231.10 415.58 450.88 455.91 223.80 39.80 11255 16540 17945 18145

Annex 5

SLPRC REFINERY ECONOMICS

1983-85 a/ 1st 0 1986 b/ 4th Quartr 1986 c/ Projected Year 1990 d/ e/Crude & Product Revenue Crude & Product Revenue Crude & Product R3venue Crude & Product Revenue

Values (costs) Values (costs) Values (costs) Values (costs)Tonne per ton per ton per ton per ton per ton per ton per ton per ton

Crude run (1.000! (1238.00) (1238.00) $151.36 ($151.36) $112.80 (S112.80) S189.00 (S189.00)

ProductionLPG 0.004 S400.00 $1.60 $325.00 S1.30 S167.00 10.67 1450.00 S1.30Gasoline 0.161 1288.00 S46.37 S185.00 129.79 S142.25 122.90 1267.89 143.13Kero/Jet 0.182 S283.00 S51.51 S228.00 141.50 S154.40 $28.i2 $270.87 149.30Gasoil 0.344 S258.00 $88.75 $200.00 S68.80 S131.29 145.16 1246.93 S84.94Fuel oil 0.272 5180.00 149.14 1106.00 128.94 S95.94 126.04 1138.32 137.62

Total Products 0.965 1237.37 1170.32 1122.89 1216.79

Gross Refining Margin (10.63) 118.96 1lO.09 S27.79Operating Costs (7.00) (8.00) (8.00) (9.72)

Operating Profit/(Loss) per ton of crude (7.63) 10.96 2.09 18.07Annual profit, S million, for 240,000 tons (1.85) 2.6 0.50 4.3

Annual penalty for exporting 20,000 tons ofof fuel oil at 115 per ton (S0.3m) (S0.3m) (50.3m) (10.3.)

Net operating profit (loss)onan annual basis (12.13m) S2.3m S0.2m S4.3.

a/ Figures based on average actual CIF prices for Bonny Lignt crude and import parity prices for products during 1983-85; product pricesare derived from average spot prices in N.W. Europe plus freight insurance and losses from Rotterdam to Freetown.

b/ Figures based on prices during the first quarter of 1986.c/ Figures based on prices during the fourth quarter of 1986.d/ Figures based on projected prices for crude and products as given in Scenario I (Annex 2.2, page I of 2).

Underlying assumptions: (1) crude valued at 123.00/barrel; (2) Product price differentials such that world scale refinery in NW Europewould be economic.

e/ Figures based on sunk capital costs of existing facilities and assuming no future investments.

GUINEA (CONAKRYI A F ICA* -' - ~~~~~~~~~~~SIERRA LeaN

' ,.' I r.

,r REETO ; S IE R R Ajo v\ '8 4 < L ~~~~~E O N E V 0

4 \ LEONEt,. 'o H

Sierra Leone ' n

Frc ture Zone,3

30% f4,imQuIs"s" Al *

I1'L!~~~~~~~ ~MOC * LIBERIA1-2 ~~~~~~~0

DES,Gf4ATED AREA v

ATLANTIC OCEAN

- 122 -

Annex 7Page 1 of 4

AUTOCENERATION OF ELECTRICITY IN THE AREA OF WESTERN POWER CRID

1. All power generating sets, even as small as 1.5 KVA, arere4uired by law to be registered with NPA. Tho NPA list has 500generators ranging from 1.5 KVA to over 500 KVA and totaling 12936 KVA.There are 30 registered generators of 100 or more KVA capacity withcombined capacity of 6942 KVA. They are listed in Annex 7, Table 1.

2. To get an idea of the existing capacity not reported on the NPAregistration list, the top twenty NPA consumers in non-domestic tariffcategories 3 and 4 were selected. Only 3 consumers in each category wereon the NPA registration list. To verify whether or not other top 20consumers had power generators two approaches were taken: (a) about adozen industrial plants/commercial facilities were visited and shortinterviews were conducted; (b) information on other plants/facilities wascollected from those who sold and serviced the generating sets (see belowfor the details). From this information it was established that at leasthalf of the top twenty consumers in tariff categories 3 and 4 have powergenerating sets and there is at least 12641 KVA capacity in addition to12936 KVA registered with NPA, bringing the total to 25,577 KVA. Thecombined capacity of generation above 100 KVA is 12,641 + 6,942 = 19,583KVA. See Annex 7, Table 1.

3. Based on the above information and assuming a power factor of0.8, the minimum installed capacity in the western area is estimated at25,000 KVA or 20 MW. The actual capacity could be as high as 35 MW. Forthis study 30 MW of self-generation capacity has been assumed. This isapproximately the same as the installed capacity of NPA's western system.

Residential

4. Interviews with maintenance service companies suggest thatabout 600 households have sets that run 3 hours a day. On average theresidential generation capacity is:

15 (KVA) x 0.80 (power factor) x 600 (households) = 7.2 MW

and estimated residential autogeneration assuming a load factor of 0.6:

(7.2 MW) x (0.6) x (365) (3 hours/day) = 4.' Cwh

Industrial and Commercial Generation

5. A survey of industrial sites suggests about 6 hours ofautogeneration. Assuming a load factor of 0.7 and 23 MW generatingcapacity, which is 30 MW total minus 7 MW, residential capacity, auto-generation by industrial establishments is estimated at:

23 MW :; 0.7 x 365 days x 6 hr/day = 36.3 Cwh/year

- 123 -

Annex 7Page 2 of 4

Cost of Autogeneration

6. All of the autogeneration is by diesel and fuel consumption of280 gr/kWh is assumed. This is the consumption at the Aureol Tobacc',Company and at the NPA Falconbridge power station (with rather smallsets). Compared with about 225 gr/kWh for the larger Kingtom units, thesmaller generators in the household will consume this much if not more.Estimated 1985 diesel consumption for approximately 5 Gwh of residentialand 35 Cwh of industrial/commercial autogeneration is 11,200 metric tonsof diesel oil (40 GWh at 280 tons/GWh).

At an average landed cost of $252/MT for diesel and average export parity(FOB) price of $151/MT for fuel oil in 1985 marginal energy costs ofgeneration in 1985 were

Autogeneration by diesel: ($252/MT) x (280 gr/kwh) = USC7.1/kwh;

NPA generation by fuel oil: ($151/MT) x (225 gr/kwh) = US¢3.4/kwh.

The US¢ 3.7/kwh fuel cost differential represents the incremental cost tothe economy of using private instead of public generation facilities,assuming capital costs as sunk. For tihe 40 GWh of private generationestimated for 1985, this differential is equivalent to $1.5 million.This estimate is an approximation, as it does not take account of thehigher technical losses in transmission and distribution associated withpublic generation. The correction for losses has not been made as theseare not known. Based on experience in other developing countries, tech-nical losses at NPA could be in the range of 10-15%, which would requirea corresponding reduction in the estimate for incremental costs ofprivate generation. Non-technical losses (such as billing errors) arenot relevant to the calculations as they represent internal transferpayments and not an opportunity cost to the economy: The 40 GWh wouldhave been provided to customers by NPA even if it did not bill them.

- 124 -Annex 7Page 3 of 4

Table 1,

PRIVATE GENERATORS REGISTERED WITH NPA ADDITIONAL GENERATORS NOT R£LiSTERED W/NPA

Name Capacity Name Capacity

(KVA) (KVA)

Freetown Cold Storage (1) 100 Mammy Yoko Hotel 2,687

Freetown Cold Storage (2) 100 Tobacco Company 1,025

Sierra Bricks & Ceramics 144 Bintumani Hotel 3,000

Murin Development Co. 145 Brewery 720

S.L. Brewer" Ltd. 555 Cape Sierra Hotel 1,500

Freetown International Club 362 Lagonda Restaurant 750

Sierra Leone Palm Kernel (1) 500 National Insurance 350

500 American Embassy 1,360

Afroplant Manufacturing Co. 250 National Petroleum 120

S.L.P. Refinery (1) 620 Shell 120

32 Casino 112

National Petroleum 100 Brook Field Hotel 330

G.E. & Construction Co. 130 British High Comm. 270

G.E. & Construction Co. 120 Standard Bank of S.L. 297

S.L. Commercial Bank 300Texaco Installation 100 Total 12,641

Atlantic Printers Ltd. 110

T. Chothrams & Sons Natco Factory (1) 100

(2) 125

S.L. Enterprises (TUP) 127

N.D.M.C. 140Metal Chrome Const. Co. 189

G.E. a Const. Co. Ltd. 120

J.T. Chanri Soap Factory 420

Jumbo Cubes Ci. Ltd. 200

S.L,E.T. (1) 150

(2) 180

(3) 150

A. Toufic & Sons 206

S.L Suitcase Works 117

G. Shanderdas 200Assad Yaz Beck & Sons 100

J. Mattar & Co. 125

J. Mattar & Co. 125

Total 6,942


Table 2- IMPORTED ELECTRICITY GENERATING SETS

ValueYear No. of Sets '000 Leones '000 S a/

1982 430 1,135.8 917,3

1983 194 1,611.4 960.1

1984 458 3,321.0 1,323.1

1985 639 5,764.2 1,218.6

Total 1,721 11,832.4 4,419.3

a/ Converted at official exchange rates. At parallel market rates, thetotal value exceeds S1O million. This higher figure reflects theeconomic costs to the country. Discussions during the interviewssuggests that most of the sets were imported using dollars eitherpurchased in the parallel market or those that would have been sold therefor conversion to Leone.

Source: Sierra Leone Customs office.

- 126 -

Annex 8Page 1 of 3

REGRESSION ANALYSIS

Dependent Variable: Generation (in GWh)

Independent Variables: GOP; GWh tagged by one period (year); Tariffs

NUMBER OF CASES: 7 (1976-82) NUMBER OF VARIABLES: 4

TABLE 2.2 PRICE AND INCOME EFFECT

INDEX NAME MEAN STD.OEV.

I LNGDP 5.990 0.063

2 LNLAG 4.636 0.137

3 LNPRI 4.301 0.288

DEP. VAR.: LNGWH 4.690 0.155

F TO ENTER 0, F TO REMOVE - 0, TOLERANCE = 0.0000

DEPENDENT VARIABLE: LNGWH

VAR. REGRESSION COEFFICIENT STD. ERROR F(I, 3) PARTIAL r^2

LNGDP 1.0438 0.4070 6.577 0.6867

LNIAG 0.3146 0.4667 0,454 0.1315

LNPRI -0.1740 0.2663 0.427 0.1245

CONSTANT: -2.2720

STD. ERROR OF EST. = 0.0248

R SQUARED = 0.9872

MULTIPLE R = 0.9936

ANALYSIS OF VARIANCE TABLE

SOURCE SUM OF SQUARES D.F MEAN SQUARE F. RATIO

REGRESSION 0.1424 3 0.0475 77.0420

RESIDUAL 0.0018 3 0.0006

TOTAL 0.1443 6

Note: If the lagged GWn var iable is excluded fromn the equation, then the price elasticity

increases to -0.3424 with a t value of 18.6.


REGRESSION ANALYSIS

Dependent Variable: Generation (in GWh)

Independent Variable: GDP; GWh tagged by one year; Dummy variables for 1982 and 1983


TABLE 2.3 REGRESSION ANALYSIS: DUFOUR TEST

INDEX NAME MEAN STO.DEi.

I LNDGP 5.965 0.0792 LNLAG 4.602 0.1853 TI 0.077 0,2774 T2 0.077 0.2775 GWH 104.638 13.1196 LAGGW 101,308 19.1507 GDP 390.515 30.546

DEP. VAR.: LNGWH 4.637 0.171

F TO ENTER 0, F TO REMOVE = 0, TOLERANCE 0.0000


VAR. REGRESSION COEFFICIENT STD.ERROR F(1, 8) PARTIAL r^2

LNLAG 0.5731 0.1810 10.031 0.5563Ti -0.0773 0.0464 2.772 0.2573T2 -0.0737 0.0387 3.613 0.3111

LNGDP 1.0227 0.3743 7.468 0.4828

CONSTANT: -4.0893

STD. E{R0R OF EST. = 0.0325R SQUARED = 0.9760

MULTIPLE R = 0.9879


SOURCE SUM OF SQUARES D.F. MEAN SQUARE F RATIO

REGRESSION 0.3435 4 0.0859 81.2583RESIDUAL 0.0085 8 0.0011TOTAL 0.3519 12

- 128 -

Annex 8Page 3 of 3

REGRESSION ANALYSIS

Dependent Variable Generation (in GWh)

Independent Variables: GDP, lagged GWh


INDEX NAME MEAN STD.DEV.

1 GDP 384.873 29.8632 LAGGW 96.355 16.1163 GWH 101.582 18.0624 LNGOP 5.950 0.077S LNLAG 4.556 0.159

DEP. VAR.: LNGWH 4.607 0.170

F TO ENTER = 0, F TO REMOVE = 0, TOLERANCE = 0,0000


REGRESSIONVAR. COEFFICIENT STD. ERROR F(1, 8) PARTIAL r^2

LNGDP 1.0227 0.3743 7.468 0.483LNLAG 0.5731 0.1810 10.031 0.556CONSTANT: -4.0893

STD. ERROR OF EST. = 0.033R SQUARED = 0.9707MULTIPLE R = 0.9853


SOURCE SUM OF SQUARES D.F. MEAN SQUARE F RATIO

REGRESSION 0.2805 2 0.1402 132.702RESIDUAL 0.0085 8 0.0011TOTAL 0.2889 10

Note: Given, LNGAh = b0 + b1. LNGDP + b2. LNGWh (-1), the estimated short-run incomebI

elasticity Is bi while the long-run elasticity is- 11-2

For the estimates made above, the short run elasticity is 1.0227 and the long runelasticity of demand with respect to income is 2.396.

- 129 -ARRW 9Paq I ** 2

ItELATIi4SIP OF LOW Ft4CAST. MP AND £LICICItr £NERAT tIONAMERATO WTh SCCINIO

5tgtf Area Provlncalo Areas Sierra LPi cl Actual GDP ForecaIt Actual Forecaet Olf.s.,ly Actual %tlo Forec Dat Of.W eIV Actual Thoretl tol

Yar Factor '73 Lag."-nWr. Sooy (dad) to deangd $*Ply For ectSt ( nd) to ft_uwd Sply IV and o

(M4. L^eoes) ("h) I-l Wh I(0) 4/<afhI fOlih) (00 I it g1) b/ ( {l (91111 (Cmi} (oh)i ( -

1913 420.5 132.1 123.6 132.7 9.1 25.4 25.0 33.2 7.6 149.0 165.9 16.9196 422.6 132.7 119.3 133.6 14.5 26.7 25.0 33.2 6.6 146.0 167.3 21.3I9N5 431.0 133.8 93.3 137.1 43.8 18.6 25.0 34.3 15.7 111.9 171.4 5 951966 431.0 137.1 85.3 139.1 53.6 7.8 25.0 34.6 27.0 93.1 t73.9 60.6

009 fec.73 GOP rote St9ly Thaoraticel SieglI SeoIyfore st of g othi foreFt a dand forecoIt forecast

(N.Loones) (%) (Gth) (a) (GUh) GoI (Si)

1967 439.6 2 139. Ie 120.0 143.1 23.1 30.0 25.0 35.8 5.6 150.0 t76.9 26.91988 457.1 4 143.id/ 144.0 151.3 7.3 36.0 25.0 37.6 1.8 180.0 189.1 9.1199 479.9 5 151.3 164.2 164.2 0 41.1 25.C 41.1 0 205.3 205.3 01990 503.9 5 164.2 180.9 180.9 0 45.2 25.0 45.2 0 226.1 226.1 01991 534.1 6 180.9 202.9 202.9 0 50.7 25.0 50.7 0 253.6 253.6 01992 560.8 5 202.9 227.9 227.8 0 56.9 25.0 16.9 0 264.7 264.7 01993 594.4 o 227.8 258.3 258.3 0 64.6 25.0 64.6 0 322.9 322.9 01994 624.1 3 256.3 291.6 291.8 0 72.9 25.0 72.9 0 364.7 364.7 01995 661.5 6 291.8 328.8 326.8a/ 0 82.2 25.0 82.2 0 411.0 41:.0 01996 694.5 3 328.8 366.4 366.4 0 91.5 25.0 91.5 0 457.9 457.9 01997 722.2 4 366.4 401,6 401.6 0 100.4 25.0 100.4 0 502.0 502.0 01996 756.3 5 401.6 440.3 440.3 0 110.1 25.0 110.1 0 550.4 550.4 01999 76. 6 4 440.3 478.1 476.1 0 119.5 25.0 119.5 0 597.6 597.6 02000 627.9 5 478.1 521.3 521.3 0 130.3 23.0 150.3 0 6S1.6 651.6 0

2001 660.9 4 521.3 563.9 565.9 0 141,0 25.0 141 0 704.9 704.9 02002 903.9 5 543.9 613.3 613.3 0 153.3 25.0 153.3 0 766.6 766.6 02005 940.1 4 613.3 662.8 662.6 0 165.6 25.0 165.6 0 828.4 628,4 02004 987.1 5 662.6 720.4 720.4 0 160.1 25.0 180.1 0 900.5 900.5 02005 1026.6 4 720.4 777.8 777.6 0 194.5 25.0 194.5 0 972.3 972.3 02006 1077.9 5 777.8 644.7 644.7 0 211.2 25.0 211.2 0 1055.9 1055.9 02007 1120.9 4 844.7 911.3 911.3 0 227.8 25.0 227.6 0 1139.1 1139.1 02008 1176.9 5 911.3 966.9 988 9 0 247.2 25.0 247.2 0 1236.1 1236.1 02009 1223.9 4 968.9 1066.1 156.1 0 266.5 25.0 266.5 0 1332.6 1332.6 02010 1285.1 5 1066.1 1156.3 IlSo.3 0 289.0 25.0 289.0 0 1445.3 1445.3 02011 1336.5 4 1156.3 1245.9 1245.9 0 311.5 25.0 311.5 0 1557.4 1557.4 02O12 1403.3 5 1245.9 1350.4 1350.4 0 337.6 25.0 337.6 0 1686.0 166U.0 02013 1459.4 4 1350.4 1454.1 1654.3 0 363.5 25.0 363.5 0 1817.6 1817.6 02014 1532.4 5 1454.1 1575.0 1575.0 0 393.8 23.0 393.8 0 1948.6 196.86 02015 159 3.7 4 1575.0 1694.6 1694.6 0 423.7 25.0 423.7 0 2118.5 2118.5 02016 1673.4 5 1694.8 1834.5 1834.5 0 458.6 23.0 458.6 0 2293.1 2293.1 02017 1740.3 4 1834.5 1972.5 1972.5 0 493.0 25.0 493.0 0 2465.5 2465.5 02016 1627.3 5 1972.5 2133.3 2153.3 0 533.2 25.0 533.2 0 2646.5 2666.6 02019 1900.4 4 2133.3 22.1 2292.1 0 573.0 25.0 573.0 0 2865.1 2865.1 02020 1995.4 5 2292.1 2510.7 2510.7 0 627.7 25.0 627.7 0 3138.4 3138.4 0

*/ ft41 forerpredletla,: U14bh bO + Dl Lt4DW * b2 . Lt45W (-1 vIt) i bO--4.0893S bl-1.0227, 2 * 0.5731b/ Aseumd to ba 255 of gasftrn pgnartlon.c/ Aswid recovery for FY67 In Western ore: 120 01h.d/ Aisamed rovthi for Fy06: 20M, seply ess&d to be a@ual to tsa dm_nd afterwards.*/ tl decreasd every year fro 99f to 73% of Its true result.

- 130- Aul0' 9

RILATIOIFP OF LOAD fiMEAST, MP AND ELECTAICITY OENATImt - MAN CAN I1lMAI0

go aer1 Area Prowlwtiel AMtos S lwm LowFl Mal Actual GDP Forms at Actal feracSt Olf.ywoly Actual Ratio Fwaost Di .popIy Actual Thaatlcal Tatel

Yew Factor '13 Lag.iW. StWly aomad) to imad Suagly Forecast (d.dl ft da SoY I iowd s

N. acs) (4ht (-I I (t0)(0) (l11a/ Sit(h) SAt (lbb/ Si (1bi) (SI,) (SIh) (Sit)

9INS 420.5 132.1 123.6 132.7 9.1 25.4 29.0 33.2 7.8 140.0 1695. 16.919i4 422,6 132.7 119.3 133.6 14.5 2S.7 25.0 33.5 6.6 146.0 167.3 21.3I9NS 431.0 133.8 93.3 137.1 43.8 18.6 25.0 34.3 19.7 111.9 171.4 59.51966 431.0 137.1 65.3 139.1 53.8 7.8 25.0 34.8 27,C 95.1 113.9 i0.6

iG ac. 73 MOP trat Stepily Thac¶cai StiDty SooelIforecast of' groth forecast dnud */ forGe St eet

(04.L Lom a) Il (01h) 0111) (G h) (W I)

I9"7 431.0 0 139.1c/ 120.0 140.2 20.2 30.0 25.0 35.1 5.I 150.0 175.3 29.31966 431.0 0 140.2d/ 132.0 140.8 8.6 33.0 25.0 35.2 2.2 16!.0 176.0 11.01989 431.0 0 140.8 141.2 141.2 0 55.3 25.0 35.3 0 176.5 176.5 01990 431.0 0 141.2 141.4 141.4 0 35.4 2590 35.4 0 176.6 176.6 0IWI 439.6 2 141.4 144.4 144.4 0 56.1 25.0 36.1 0 180.5 190.5 01992 448.3 2 144.4 149.1 149.1 0 57.2 25.0 37.2 0 186.3 186.5 01993 457.2 2 149.1 154.9 154.9 0 38.7 25.0 36.7 0 193.6 193.6 01994 446.3 2 11U4.9 61.6 161.6 0 40.4 25.0 40.4 0 202.0 202.0 01995 475.6 2 161.6 168.9 168.9 0 42.2 25.0 42.2 0 211.1 211.1 01996 485.1 2 168.9 176.7 176.7 0 44.2 25.0 44.2 0 220.9 220.9 01997 499.6 3 176.7 186.9 186.9 0 46.7 25.0 46.7 0 233.6 233.6 01996 509.5 2 166.9 196.9 196.9 0 40.2 25.0 49.2 0 246.1 246.1 01999 324.7 3 196.9 209.2 209.2 0 53.3 25.0 52.3 0 261.5 261.5 02000 535.2 2 20M.2 220.9 220.9 0 55.2 25.0 55.2 0 276.1 276.1 0

2001 551.3 3 220.9 254.9 234.9 0 56.7 25.0 56.7 0 293.6 293.6 02002 362.5 2 234.9 246.4 248.4 0 62.1 25.0 62.1 0 310.5 310.5 02005 579.2 3 246.4 264.4 264.4 0 66.1 25.0 66.1 0 330.5 330.5 02004 590.8 2 264.' 279.6 279.6 0 69.9 25.0 69.9 0 349.5 349.5 02005 608.5 3 279.5 297.5 297.5 0 74.4 25.0 74.4 0 31'.9 311.9 02006 620.7 2 297.5 314.7 314.7 0 76.7 25.0 76.7 0 393.4 393.4 02007 639.3 3 314.7 334.9 334.9 0 83.7 25.0 63.7 0 416.6 416.6 02008 652.1 2 334.9 354.2 354.2 0 86.6 25.0 t3.6 0 442.6 442.8 02009 671.7 3 354.2 376.9 376.9 0 94.2 25.0 94.2 0 471.1 471.1 02010 685.1 2 376.9 396.7 396.7 0 99.7 25.0 99.7 0 490.4 496.4 02011 705.7 3 398.7 424,4 424.4 0 106.1 25.0 106.1 0 530.5 530.5 02012 719.6 2 4*.o4 446.7 448.7 0 112.2 25.0 112.2 0 560.9 960.9 02013 741.4 3 448.7 477.5 477.5 0 1t9.4 25.0 119.4 0 596.9 596.9 02014 756.2 2 477.5 505.1 505.1 0 126.3 25.0 126.3 0 631.4 631.4 02015 778.9 3 505.1 537.5 537.5 0 154.4 25.0 134.4 0 671.9 671.9 02016 794.5 2 537.5 M6e.5 566.5 0 142.1 25.0 142.1 0 710.6 110.6 02017 618.3 3 568.5 605.1 605.1 0 151.3 25.0 151.3 0 756.4 756.4 02018 834.7 2 605.1 639.9 639.9 0 159.9 25.0 159.9 0 799.8 799.6 02019 6m9.7 3 639.9 681.1 6i1.1 0 170.3 25.0 170.5 0 851.4 651.4 02020 816.9 2 661.1 720.3 720.3 0 180.1 25.0 180.1 0 900.4 900.4 0

s/ t4da o*r predlctlon LNWI * bO + bl * L*iO + *2 L tM E -l) wlIt iO--4.0693, bl * 1.0227. bU * 0.5731.i/ Assoo to i 25% of sa~rn ptrstlat.C/ Assfjd rcw#'V ftr FY1987 Ii Wsftarn areaa 120 SNh.d/ Ass_id gJrth for fY1968 101, sgply aCtsad to be *oaw to the dfid aftarwarda.

- 131 - Annex 10

PATTERN OF TARIFFS SINCE 1975

Tariffs in force in year

1975 1977 1982 1984 1985

Ti: Dmestic Block 1, 0-100 kWh/month SLf/kWh 9.5 10.5 14.50 16,65 41.09Block 2, over 100 kWh/month SL¢/kWh 9.5 10.5 20.0 23.00 47.44Minimum charge per month Le 1. 1. 1.5 2. 6.

T2: Up to 15 kW Block 1, 0-100 kWh/month SL¢/kWh 11.00 12.00 16.0 Ie,oo 42.84Block 2, > 100 kWh/month SLf/kWh 11.00 12.00 22.00 25.30 49.74Minimum Charge per month Le 2.00 2.00 3.00 4.00 6.00kVARh (not compulsory) SLf/kVARh - - 3.00 3.45 6.00

T3: Over 15 Energy rate SLf/kWh R.50 10.50 18.00 20.70 45.14Peak demand per month SL Le/kW 4.00 5.00 7.50 8.60 12.90Minimum charge per month Le 100.00 100.00 150.00 170.00 255.90kVARh SLf/kVARh - - 2.40 2.75 5.00

T4: Over 15 kW; h.v. Energy rate SL-/kWh 7.00 8.50 15.00 17.25 41.69Peak demand per month SL Le/kW 4.00 5.00 7.50 8,85 13.80Minimum charge per month Le 500.00 500.00 750.00 860.00 1343.00kVARh SL-/kVARh - - 2.00 2.30 4.00

T5: Street Lighting Energy rate SLfkWh 9.00 11.00 19.00 21.85 46.29

T6: Temporary Supply,

up to 15 kW Energy rate SLt/kWh 13.00 14.00 24.00 27.60 52.04

Source: NPA. Fuel adjustment included since 1982 (at the rate Le 0.15 for each 1% change in the cost offuol oil from Its Novembor 1981 level).

- 132 -

Annex 11Page 1 of 7

ESTIMATION OF GENERATION COSTS

BASE FUEL PRICES

Kingtom Plant

Heavy fuel centrifugation losses: 2%

SLOW SPEED DIESEL: Such units are assumed to burn 230 kg of fuel oil(FO)/MWh and 5 kg of gas oil (GO)/MWh. Current maintenance cost(lubricant and small parts) is estimated at US$11.0/kWh.

US$/MWh

FO (230 kg/MWh)/(.98) x ($131.8/t) - 30.93GO (5 kg/MWh) x ($243.3/t) - 1.22Maintenance - 11.00

Total - 43.15

SSD US+/kWh - 4.32

HIGH SPEED DIESEL: Such units are assumed to burn 231 kg of FO/MWh and10 kg/MWh of gas oil - current maintenance cost is estimated atUS$13.0/MWh.

US$/MWh

FO (231 kg/MWh)/(0.98) x ($131.8/t) 0 31.07GO (10 kg/MWh) x ($243.3/t) - 2.43

Total - 46.50

HSD USJ/kWh - 4.65

Note: Cost of autogeneration (in Leone/kWh) based on different prices atwhich gas oil was purchased during 1985 are to be inserted here.

1/ Fuel prices, including local costs, used in estimating generatingcosts, are given in Annex 11, page 7, for both oil priceevaluations.

Annex 11Page 2 of 7

-133 -

Palconbridse Plant

HIGH SPEED DIESEL: Such equipment is assumed to burn 290 kg of gasoil/MWh, and current maintenance cost is estimated US$9.0/MWh. Theseunits are used as standby equipment.

US$/MWh

GO (290 KG/MWh) x $243.3/t) 0 70.56Maintenance - 9.00

Total - 79.56

FB US+/kWh - 7.96

New Gas Turbine Plant (After 1993)

Gas turbines are assumed to burn 237 kg/MWh of gas oil, and currentmaintenance should reach US$4.30/MWh.

US$/MWh

GO (237 kg/MWh) x ($243.3/t) - 57.66Maintenance - 4.30

Total - 61.96

GT USJ/kW.i - 6.20

Short Run Marginal Costs (SRMC)

Peak Time

Period until 1993:

Falconbridge plant expected use : 10%High speed diesel of Kingtom expected use : 90%

Resulting SRMC : 7.96 x 0.1 + 4.65 x 0.9

SRKC(1) : US¢/kWh - 4.98

Period after 1993:

Gas turbine 100% of the time:

SRMC(2) : US¢/kWh - 6.20

Annex 11- 134 - Page 3 of 7

Off-Peak Times

All periods:

Kingtom plant slow speed diesels 100% of the time

SRMC(3) : US+/kWh - 4.32

Auto-Producer (small high speed diesel)

These isolated small diesels are measured to burn 290 g/kWh of gas oiland cost US00.9/kWh for maintenance cost.

Gas oil:

1 IG - 4.546 litersSpecific volume : 1.55 literp/kg.I IG - 3.94 kgI Ton - 254 IG

Gas oil cost factor; (0.290 kg/kWh)/(3.94 kg/IG) - 0.0736 IG/kWh

Gas Oil price: $243/ton - 1 US$/IG

Total costIncluding

Fuel Price Fuel Cost maintenance(US+/IGC) (US+/kWh) (USigk/K)

Economic cost 100 7.36 8.26

Note: During 1985, the price of gasoil in the domestic market variedfrom 7 Le/IG (official prices) to 21 Le/IG (black marketprices). Assuming fuel use of 0.0736 IG/kWh and maintenance costsof 0.047 Le/kWh (US+O.9/kW converted at 5.4 Le/$), the variablecosts of auto-production varied from 0.6 to 1.6 Le/kWh dependingupon the amount of fuel purchased in the black market.

Annex IIPage 4 of 7

- 135 -

Opportunity Cost of Unserved Energy

Opportunity cost of the unserved energy shall be assumed to be equal tothe economic cost of generating one kWh from an isolated small diesel,capital cost being considered as a sunk cost. This is equivalent to:

UE . US¢/kWh - 8.26

ALTERNATIVE FUEL PRICES

Kingtom Plant:

SLOW SPEED DIESEL:US$/MWH

FO (230 kg/MWh)/ x ($ 78.4/t) - 18.03GO (5 kg/MWh) x ($148.2/t) - 0.74Maintenance = 1'.00

Total 29.77

SSD US¢/kWh = 2.98

High Speed Diesels

FO (231 kg/MWh)/(0.98) x ($ 78.4/t) 18.11GO (10 kg/MWh) x ($148.2/t) - 1.48Maintenance = 13.00

Total 32.59

HSD USJ/kWh = 3.26

Falconbridge Plant

GO (29J kg/MWh) x (148.2/t) - 42.98Maintenance 9.00

Total - 51.98

FB US¢/kWh = 5.20

Annex 11

-136 - Page S of 7

New Gaa Turbine Plant (after 1993)

GO (237 kg/MWh) x ($148.2/t) 35.12Maintenance ' 4.30

Total - 39.42

GT US*/kWh - 3.94

Short Run Marginal Costs (SRMC)

Peak Time

Period until 1993SRMC(1) : US4/kWh - 3.45

Perlod after 1993SRMC(2) : USj/kWh - 3.94

0ff-Peak Time

All periodsSRMC(3) : US+/kWh - 2.98

Auto-Producer (small high speed diesels)

USO/IG Fuel Cost US+/Wh

Economic Cost 62.5 4.60 5.50

Opportunity Cost fif Unserved Energy

UE : US*/kWh - 5.50

Annex 11

-137- Page 6 of 7

SUMMARY OF FUEL COSTS

Base AlternativeUSJ/kWh USJ/kWh

Kingtom

SSD 4.32 2.98HSD 4.65 3.26

Falconbridge

FB 7.96 5.20

Gas Turbine

GT 6.20 3.94

SRHC

Until 1993 - Peak (Bl) 4.98 3.45After 1993 - Peak (B2) 6.20 3.94All Periods - Off-Peak 4.32 2.98

Auto-Producers

Official MarketEC (A) 8.26 5.50

Unserved Energy

UE 8.26 5.50

Minimum Replacement Cost

A-Bi 3.28 2.05A-B2 2.06 1.56

Annex 11Page 7 of 7

FUEL PRICE SCENARIOS a/

(1986 prices)

Fiscal year 1986 1987 1988 1989 1990 ISI 1992 1993 1994 1995 1996 1997 1996 1999 2000 Local costs

Bestimates --------- --------- estimates --------- '86 USt %

OASE FlUf PRIIISCrude oil current prices 20.00 22.00 22.00 2?.00 23.00 25.60 28.40 31.60 35.10 39.00 40.70 42.40 44.20 46.00 48.00

Crude oil A 20.00 20.60 19.50 18.00 17.60 18.80 20.10 21.50 22.90 24.50 25.00 25.00 25.00 25.00 25.00

Fuel Oil P 119.00 122.40 115.50 108.50 106.30 112.80 119.80 127.20 135.00 143.30 146.00 146.00 146.00 146.00 146.00 12.80 10.8

ratio CiA 5.9S 5.94 5.96 6.03 6.04 6.00 5.96 5.92 5.90 5.85 5.84 5.84 5.84 5.84 5.84

Gas oil C 215.08 219.47 206.57 193.60 188.80 199.52 211.55 223.75 236.56 250.08 254.56 254.38 254.04 254.06 253.52 28.30 13.2

ratio C/A 10.75 10.65 10.70 10.76 10.73 10.61 10.52 10.41 10.31 10.21 10.18 10.18 10.16 10.16 10.14

Kerosene 0 235.98 240.84 226.64 212.38 207.27 218.89 232.13 745.56 259.11 274.54 279.45 279.25 278.86 278.94 278.28 29.30 12.5 1

ratio D/A 11.80 11.69 11.74 11.80 11.78 11.64 11.55 11.42 11.3 11.21 11.18 11.17 11.15 11.16 11.13

Coal E 52.00 50.00 51.00 51.00 53.00 53.60 54.20 54.80 55.40 56.00 56.00 56.00 56.00 56.00 56.00 5.00 9.6 CD

ratio F/A 2.60 2.43 2.64 2.83 3.01 2.85 2.70 2.55 2.42 2.29 2.24 2.24 2.24 2.24 2.24 1

AlTTER4ATIVE FLUL PRICES estimates --------- --------- estimates ---------

Crude oii current prices 10.00 10.00 10.00 12.00 13.00 15.40 18.20 21.50 25.40 30.00 31.80 33.70 35.70 37.80 40.00

Crude oil A 10.00 9.40 8.80 9.80 9.90 11.30 12.80 14.50 16.50 18.80 19.10 19.50 19.90 20.20 20.60

Fuel oil B 69.60 62.40 59.00 64.50 65.10 72.70 61.10 90.50 101.10 112.80 114.70 116.50 118.50 120.40 172.40 12.80 19.5

ratio U/A 6.56 6.64 6.70 6.58 6.58 6.43 6.34 6.24 6.13 6.00 6.01 5.97 5.95 5.96 5.94

Gas oil C 123.52 117.26 110.95 i18.96 118.93 132.04 145.8V 161.13 178.84 196.19 201.11 204.50 207.93 210.41 214.02 24.70 20.0

ratio C/A 12.35 12.48 12.61 12.14 12.01 11.69 11.39 11i 10.84 10.57 10.53 10.49 10.45 10.42 10.39

Keros.ene 0 135.15 128.29 121.33 130.17 130.15 144.57 159.74 176.59 196.08 218.07 220.61 224.33 228.10 230.62 234.79 24.60 16.2

ratio C/A 13.52 13.65 13.79 13.28 13.15 12.79 12.48 12.18 11.88 11.60 11.55 11.50 11.46 11.43 11.40

Coal E 52.00 50.00 51.00 51.00 53.00 53.60 54.20 54.00 55.40 56.00 56.00 56.00 56.00 56.00 56.00 5.00 9.6

ratio F/A 5.20 5.32 5.80 5.20 5.35 4.74 4.23 3.78 3.36 2.98 2.93 2.87 2.81 2.77 2.72

a/ Crude ol! USS/bbl.Other fuels US$/t, CIF F-eetown


^uw 12Pb" I of 3

GEMMTIOM AWD ODNSUMPTION-8ASIE (ASE !ICEIOARIO

NESTEIN OMA PWVINCIAL OMA

Fl WAI PAINSICIPRII&I fto rouldential acniumptlan VW resideewtvai amemotion S"W

Yoor Genoration System Losses Sales ConsmoptIon VP to 15M LV Ow 15 KM HV Ov.IWW llcphtinq Gonerstlon Sfitem Losins Sales Canommstion Up ft Ism LV �v. ISM m ow. 1� 1140t

GWh GVh GWh Wh owh s GEh II Gklh S (Wh GWh I Gwh GWh QkPh 9

Actual

1984 119.5 26.9 32.2 87.1 47 40.6 10.9 15 15.4 25 21.6 1 0.6 26.7 40.2 143.7 16.0 99 9.4 19 3.1 20 3.2 2 ILS 0

1905 93.5 23.5 21.9 71.4 47 33.7 12 8.6 I's 10.9 2-5 17.6 1 0.6 18.6 3.3.4 6.6 12.0 60 7.2 is 2.1 20 2.4 3 0.3 0

Forecast

1967 120.0 27.5 51.0 87.0 40 34.6 12 10.4 19 t6.5 28 24.4 1 0.9 V.0 40.0 12.0 16.0 60 10.8 17 3.1 19 3.4 2 0.4 2

1986 132.0 27.5 36.3 95.7 40 36.3 12 11.5 19 18.2 28 26.9 1 0.9 515.0 40.0 13.2 19.5 60 I 1.9 17 3.4 19 5.8 2 0.4 2

'909 14 Z. 7 25.0 55.3 105.9 40 42.3 12 12.7 19 20.1 28 29.7 1 1.1 3i. 3 58.0 13.4 21.9 " 12.9 is 3.9 19 4.2 2 0. 1) 2

1990 141.4 24.0 55.9 107.5 40 47.9 1 2 12.9 1 9 ?0.4 28 30. I I 1.2 3,5.4 56-0- 12.7 22.7 99 15.4 to 4.0 19 4.3 2 0.5 2

1991 144.4 25.0 33.2 111.2 40 44.15 12 15.3 19 21.1 28 31. i 1 1.2 56.1 34.0 12.5 23.8 iS 13.8 la 4.5 19 4..5 1 0.7 2

1992 149.1 22.0 52.8 116.3 40 46.5 12 13.9 19 72.1 26 52.6 1 1.2 57.7 '52.0 1 1.9 73. 3 -A 14.7 1 6 4.5 1 9 4.8 0.8 2

1995 I-A.9 21.0 32.5 122.4 40 48.9 1 2 14.7 1 9 Z3. 5 28 34.5 1 1.2 38.7 30.0 11.6 27.1 15.4 to 4.9 20 5.4 5 0.8 2

i"d 161.6 20.0 32.3 129.3 40 51.7 1 7 15.., 19 74.6 2R %.2 I 1.1 40.4 203.0 11.3 29.1 37 16.6 I� 13.2 20 5.6 3 0.9 2

1991, 168.9 20.0 33. 8 13-5.1 39 '32.7 1 3 17,6 1 q 25.7 2B 3r.8 I i. 1� 42.2 26.0 10.9 St.3 56 17.5 Is 5.6 20 6.3 4 1.3 2

1996 176.1 20.0 511. 5 141.4 39 55.1 1 3 16.4 19 26.9 28 59.6 1 1.4 44.2 24.0 10.6 53.6 55 18.5 is 13. 9 20 6.8 5 1.7 2

106.9 20.0 37.4 14g.-S 38 56.6 1 3 19-4 20 29.9 29 41.9 1 1.5 46.7 23.0 10.6 %. I 9A 19.5 Is 6.5 20 7.7 6 2.2 2

196.9 20.0 39.4 157.5 38 59.9 1 3 20.5 20 51.5 28 44.1 1 I..5 49.2 22. 0 10.8 36.4 53 20.4 1 a 6.9 20 7.7 7 2.7 2

19" 209.2 20.3 41.8 167.4 3 7 61.9 1 � 21.8 20 33.5 29 48.5 1 1.7 q. 1 2I..0 10.9 41.4 52 21.5 is 7.5 20 8.3 a 3.3 22000 270. CO 20.0 44.2 176.1 57 65.4 i N 22.9 20 515. 29 -)1.2 1 %.q 2G.0 I G.q 44.3 3 1 22.6 1 a 7.9 2 1 9.4 6 3.5 2

S?ERRA LFONE

Roslftntlal --- No. residentlai co�upption st'Oet Ato D'oducers oonoration foecart Residential 11 rsident.

Yea, GO-*lotion Syton, L,S�s Was Consu.0t1o. Up '. I'WW tY O.. 15KW HV ow. MV IjqhfI.q RLffiLF DIAMDND SAUYITE TOTAE Conswoption Coniumptlon

rUh GKh GWh Gwh GWh I Gwh % Wh GWh (Uh OWh am GA't'. 19 9^

Actual

1984 146.0 29-4 42.9 103.1 48 ISO-0 14 14.0 16 16-6 21 71.9 0.6

1985 111.9 215.'s 28.5 83.4 49 40.9 13 10.7 16 15.3 21 17.9 1 0.6 42.0 15,2 6.8 64.0 28 40.9 72 106.5

Forecast

lii7 150.0 29.9 4-3.0 105.0 43 45.6 15 15.5 19 19.9 24 24.8 1 1.2 41.9 14.6 6.7 65.2 27 45.6 ?3 122.61988 1613.0 29.9 49.5 115..3 43 '30.2 13 14.9 19 22.0 24 27.2 1 1.2 41.6 14.2 6.7 62.5 28 50.2 72 177.8

1989 176.5 27.6 46.7 127.8 43 55i. 2 13 16.6 19 24.3 24 30.2 I 1.5 41.2 15.8 5.7 W. 7 29 55.2 71 134.3

1990 176.8 26.4 46.6 130.2 43 '56. 5 15 17.0 1 9 24.7 24 30.6 1 1.6 40.9 15.4 6.7 61.0 29 96.5 7 1 134.9

1991 180.5 25.2 45.5 135.0 43 56.3 13 17.6 1 9 25.6 24 31.8 1 1.7 41.5 15.13 6.8 61.8 V) ".3 70 138.5

1992 166.3 24.0 44.7 141.6 43 61.2 15 16.4 1 9 26.9 24 53.4 1 1.7 42.t 13.6 6.9 62.6 30 61.2 70 143.0

1"s 193.6 22.8 44.1 149.5 43 64.3 13 19.6 1 9 28.7 23 513. I I 1.6 42.7 13.7 7.0 65.4 30 64.3 70 148.6

1994 202.0 21.6 43.6 158.4 43 68.3 1 3 20.7 19 30.4 23 37.1 ! 1.9 43.2 13.8 7.1 64.1 31 69.3 n 194.2

1"5 211.1 21.2 44.7 166.4 42 70.2 14 23.2 19 52.0 23 59.1 1 1.9 43.7 13.9 7.2 64.8 30 70.2 70 161.0

1996 220.9 20.8 45.9 1713.0 42 73.6 14 24.3 19 53.7 24 41.5 1 2.1 44.6 15.9 7.4 65.9 31 75.6 69 167.3

1997 235.6 20.5 48.0 185.6 41 76.3 14 25.9 20 57.1 24 44.1 1 2.2 45.2 14.1 7. -3 66.8 30 76.3 70 976.1

19" 246.1 20.4 50.2 195.9 41 80.3 14 27.4 20 59.2 24 46.8 1 2.2 46.1 14.2 7.7 60.0 30 90.3 70 1163.6

1999 261. 5 20.2 52.7 208.6 40 85.6 1 4 29.5 20 41.6 25 51.8 1 2.5 46.7 14.4 7.6 69.9 30 65.4 To 104.32000 276.1 20.0 55. 1 221.0 40 88.0 14 30.8 20 44.7 25 54.7 1 2.8 47.6 14.5 8.0 70.1 30 86.0 V 203.1

AmwKc 12PON 2 Of 3

Gt;UTIION Ai tONSlWTlSO FORECAST-AOELERATED SG%W1 gCEfRlO

NESTER AREA FWVIlC AL 0Al

flIel Pasidentiel ltm resldentlal con!Mtlon Street Grnratloon System losms Sales Residentitel reldeetll 1olg cPtlu Street

Year oneratloon System Losses Solos rnston 1Up to I-KW LV ov.1511 MY ov.5 lV LIg'tinQ Ctsieetiom Up lo IWO LV ow.15 KW 14 ow.13 llhtlaq

06b S Qth G h tG s l0h S SG J Gih S aSh 05 1t Sib Sih S , I am am I _ s am

Actue l

1964 119.3 26.9 32.2 87.1 47 49.6 13 10.9 15 13.4 23 71.6 I 0.6 26.7 40.2 10.7 16.0 ts 9.4 19 5 1 20 3.2 2 0.3 0 0.0

1963 93.3 23.5 21.9 71.4 47 33.7 12 8.6 1S 10.4 25 17.6 I 0.6 18.6 35.4 6.6 12.0 60 7.2 18 2.1 20 2.4 3 0.3 0 0.0

Forece st

1967 120.0 27.5 33.0 67.0 40 34.6 12 10.4 19 16.5 26 24.4 I 0.3 30.0 40.0 12.0 16.0 60 10.8 I? 3.1 19 3.4 2 0.4 2 0.3

19868 144.0 27.3 39.6 104.4 40 41.6 12 12.5 19 19.6 26 29.2 1 1.0 6.0 40.0 14.4 21.6 60 12.9 to 3.9 19 4.1 2 0.4 2 0.3

1969 137.5 24*.4 34 119.1 39 45.4 12 14.3 19 22.5 29 34.5 I 1.2 39.1 56.9 14.9 24.2 9 14.2 is 4.4 19 4.6 3 0.7 I 0.3

1990 167.3 21.6 36.1 131.1 36 49.8 13 17.1 19 24.9 29 38.0 1 1.3 41.1 34.0 14.6 26.3 38 13.3 I8 4.7 19 o.0 S 0.6 2 0.3

19I 161.6 19. 1 34.3 147.9 57 34.4 13 19.1 20 29.4 29 42.7 T I.- 44.3 31.3 15.1 29.2 57 16.7 le 5.2 20 5.8 3 1.0 2 0.5

1992 196.7 16.9 33.6 165.1 36 59.1 13 21.s 20 33.0 30 49.5 I I.7 47.9 28.8 13.3 32.6 56 16.3 18 3.8 20 6.5 4 1.3 2 0.7

1q93 220.3 15.0 33.0 187.3 35 6535 14 26.2 20 35.5 30 36.2 I 1.9 32.6 26.6 15.8 37.0 55 20.4 1a 6.7 ?0 7.. t 1.9 g 5 .0

1994 246.9 13.0 37.3 211.6 35 74.0 14 27.6 20 42.3 30 63.5 1 2.1 57.9 24.5 16.2 41.7 54 22.3 16 7.3 20 6.2 6 2.4 3 1.1

99 280.4 13.0 42.1 236.3 34 61.0 14 53.1 20 43.7 31 77.9 I 2.1 63.7 22.6 16.6 47.1 53 25.0 16 6.5 20 9.4 7 3.3 2 0.91996 312.5 13.0 46.9 265.6 34 93.3 14 37.2 20 51.3 31 82.3 5 2.3 69.5 20.8 16.6 32.7 52 27.4 is 9.3 21 11.1 7 3.7 2 1.0

997 342.5 13.0 51.4 291.1 53 96.1 14 40.6 20 56.2 32 93.7 I 2.7 74.6 19.2 17.2 57.4 SI 29.3 is 10.3 21 12.0 6 4.6 2 1.2

1996 375.6 15.0 56.3 319.3 35 105.4 14 44.7 20 63.9 32 102.2 1 3.2 80.3 17.7 17.7 62.6 50 31.3 18 11.3 21 13.1 9 3.6 2 1.3

1999 407.0 15.0 61.2 346.3 33 114.4 14 486. 20 69.3 52 110.9 I 3.5 6S.7 16.3 IS 67.7 49 33.2 16 12.2 21 14.2 10 6.6 2 1.3

2000 446.6 15.0 66.3 377.9 35 124.5 14 32.9 20 73.6 32 120.7 1 5.9 92.0 13.0 18.3 73.7 46 35.4 I6 13.2 21 13.3 11 6.1 2 1.S

_ ~~~~~~~~~~~~~S I EFtM LEONE

Fl woo RIsldentlel 1 , residential cm ptlws street Auto prodectet o_eration forecast Mtsidentlel 1- _s*d1t.

Year Ganeratlon Systeo Losms Salos oonauqtlon Ibto 1519W ov. 191 HV ov. 5 cKv Lllhtlnq Wt51ILE OIA6 BAUXITE lOTAL Conetloa Co_mtIon g

Sih GS 6 (h 11 tNb it 5 4 I Sh i I th I Sib G.h @6, Sib 6 S emh G M

Actuol

19t4 4.0 29.4 42.9 103.1 49 o0.0 14 14.0 16 16.6 21 21.9 1 0.6

1963 111.9 23.5 26.3 63.4 49 40.9 13 10.7 16 13.3 21 12.9 1 0.6 42.0 15.2 6.6 64.0 26. 40.9 72 106.3

Fareca t

19867 10.0 29.9 45.0 10t.0 43 45.6 13 13.5 19 20.0 24 24.1 I 1.2 44.3 16.2 7.1 67.6 26 43.6 74 127.01966 160.0 29.9 54.0 126.0 43 54.7 13 15.4 19 25.9 24 29.7 I 1.3 4J.5 16.7 7.3 19.5 26 34.7 12 140.6

1969 196.6 27.6 32.9 143.5 42 63.0 13 16.7 19 27.3 23 35.5 I 1.4 46.6 17.1 7.3 71.4 28 60.2 72 '53.5

1990 208.4 26.4 50.3 136.3 41 65.4 14 2;.9 19 30.1 25 38.9 I 1.9 48.1 17.3 7.7 73.3 28 63.6 72 163.1199 226.1 23.2 48.6 177.3 40 71.8 14 24.6 20 353. 25 43.6 1 2.5 49.4 17.7 7.9 73.0 32 77.0 66 167.2

1992 246.6 23.6 47.4 *ss.2 3 78.5 14 27.6 20 39.6 26 50.7 I 2.3 5o.6 17.9 6.1 76.8 26 74.0 72 196.41993 273.1 22.7 47.1 Z26.0 38 86.9 13 33.2 20 45.2 26 58.1 I 2.8 32.2 18.2 6.3 76.7 26 81.3 72 206.4

1994 306.6 21.5 51.5 265.3 38 97.7 15 37.5 20 36.6 26 66.3 3.0 33.7 16.3 6.3 60.7 n 92.2 71 229.3199 344.1 25.6 36. 5 281.6 37 101.2 13 42.2 20 57.3 27 77.3 I 3.4 3.1 1 8.8 6.7 62.6 35 123.0 65 231.0

1996 470.0 16.8 61.3 320.3 37 118.9 15 47.1 20 64.7 77 86.2 I 3.8 56.3 18.9 8.9 64.1 26 112.3 n2 274.31997 417.1 20.5 65.7 331.4 36 126.8 15 31.6 20 70.9 76 98.0 I 4.1 57.5 19.2 9.1 85. 29 119.7 71 297.6

1996 433.9 26.3 70.6 363.5 36 136.4 15 56.6 20 77.7 26 106.1 I 4.5 56.7 19.5 9.3 67.3 29 130.3 71 319.9

1999 493.3 26.7 75.1 419.4 36 149.3 is 61.1 20 s4.4 28 116.1 1 4.9 59.9 19.6 9.3 66.0 29 140.7 71 342.2z200 536.6 20.0 89.3 436.1 36 162.3 13 67.0 20 92.0 26 19,3 I 5.3 61.2 19.7 9.7 90.6 29 132.6 71 367.3

t: neratlon tfIqure ae lower tIe those given In "t load forecast In Annx S Ioaq 1 of 21; thtv have e rev ddwmerd ft reflect 9$. slmlflcemt

reductlon In looms asmoed In 91s eenrlo.

Amex 12Po 3 of 3

MIMING SUBSECTOQ DEMAVD FORECAST - ACCLaEqATED (GROTH SCENARIO 2/. 3/

F l al Sector product 0r th Iat o ionwr-on owth Generation *forsca _t Load factor Peak di_d forecast Peak mnd mrgin Total Total _veer RUTILE D I A9O BAUXITE RUTILE CIMIOW) BAUXIT. RUTILE DIAI(8D4 BAUXITE RUTILE D IAIOhD BAUYIT'E RUTILE DIAMOND SAUYITE RUTILE OlAlW SAUXITE Enerq eOnd M ,

(I) (3) (31 (4) 351 46) (7) (7)

5 1 S S % I tW l;3n G1h st 11 1 _ _ M N M4h _

1985 42.0 15.2 6.8 75.0 75.0 5^.4 6.4 2.3 3.4 6.6 3.5 2.5 64.0 10.11986 4 5 4 2.8 3.5 2.8 43.1 15.7 6.9 75.0 75.0 56.6 6.6 2.4 1.4 6.4 3.4 2.3 6. .. 4 .I 1967 4 5 4 2.8 3.5 2.8 44.3 16.2 7.1 75.0 75.3 56.6 6.7 2.5 '.4 6.3 3.3 2.5 67.6 10.6 3.91988 4 4 4 2.8 2.8 2.8 45.5 16.7 7.5 75.0 75.0 57.2 6.9 2.5 3.5 6.1 3.3 2.2 69.3 30.9 11.6(969 4 5 4 2.6 2.1 2.8 46.8 17.1 1.5 75.0 75.0 57.8 7.1 2.6 1.5 5.9 3.2 2.2 71.4 11.2 11.31990 4 3 4 2.6 2.1 2.8 46.1 17.5 7.7 75.0 75.0 56.4 7.5 2.7 1.5 5.7 3.1 2.2 73.5 11.5 11.01991 4 2 4 2.6 1.4 2.6 49.4 17.7 7.9 75.0 75.0 59.0 7.5 2.7 1.5 5.5 3.1 2.2 75.0 1'.' 10.61992 4 2 4 2.6 1.4 2.6 50.6 17.9 8.1 75.0 75.0 59.6 7.7 2.7 1.6 5.3 3.1 2.1 76.6 12.0 10.53993 4 2 4 2.6 1.4 2.8 52.2 18.2 8.3 75.0 75.0 60.2 7.9 2.8 1.6 5.1 3.0 2.1 78.7 12.3 10.21994 4 2 4 2.6 1.4 2.8 55.7 18.5 8.5 75.0 i5.0 60.8 8.2 2.8 1.6 4.8 3.0 2.1 60.7 12.6 9.93995 4 2 4 2.8 1.4 2.6 55.1 18.8 8.7 75.0 75.0 61.5 8.4 2.9 1.6 4.6 2.9 2.1 62.6 12.9 9.61996 3 1 3 2.1 0.7 2.1 56.3 16.9 8.9 75.0 75.0 62.2 8.6 2.9 1.6 4.4 2.9 2.1 64.1 13.l 9.41997 3 2 3 2.1 1.4 2.1 57.5 19.2 9.3 75.0 75.0 62.9 8.8 2.9 1.7 4.2 2.9 2.0 85.6 13.4 9.11998 3 I 3 2.1 0.7 2.1 56.7 19.3 9.3 75.0 75.0 63.6 8.9 2.9 1.7 4.1 2.9 2.0 67.3 13.5 9.01999 3 2 5 2.1 1.4 2.1 59.9 19.6 9.5 75.0 75.0 64.3 9.1 5.0 1.7 3.9 2.8 2.0 89.0 13.8 S.72000 5 I ' 2.1 0.7 2.1 61.2 19.7 9.7 75.0 75-0 65.0 9.3 5.0 1.7 3.7 2.8 2.0 90.6 14.0 6.5

MINING SU8SECTOR t3OA4D FORECAST - BASE CASE SCENR10 2/. /

1965 42.0 15.2 6.8 75.0 75.0 55.4 6.4 2.5 1.4 6.6 3.5 2 .3 64.0 10.1 11.41986 0 -5 0 0.0 -2.1 0.0 41.9 14.9 6.7 75.0 75.0 56.0 6.4 2.5 1.4 6.6 3.5 2.3 63.5 10.1 12.4'987 0 -3 0 0.0 -2.1 0.0 41.9 14.6 6.7 .%.0 75.0 5.6.6 6.4 2.2 1.4 6.6 5.6 2.3 65.2 10.1 12.31986 -I -4 -1 -0.7 -2.8 -0.7 41.6 14.2 6.7 75.0 75.0 57.2 6.3 2.2 1.3 6.7 3.6 2.4 62.5 9.6 12.71989 -1 -4 -1 -0.7 -2.8 -0.7 41.2 13.8 6.7 75.0 75.0 57.8 6.3 2.1 1.3 6.7 3.7 2.4 61.7 9.7 12.01990 -' -4 -I -0.7 -2.8 -0.7 40.9 l3.4 6.7 75.0 75.0 58.4 6.2 2.0 .3 6.6 3.8 2.4 61.0 9.5 13.01991 2 1 2 1.4 0.' 1.4 41.5 13.5 6.S 75.0 ,).D 59.0 6.3 2.1 1.5 6.7 57 ; 61.6 9.7 12.61992 2 1 2 1.4 0.7 1. 42.1 13.6 6.9 75.0 75.0 59.6 6.4 2.1 1.5 6.6 3.7 2.4 62.6 9.8 12.71995 2 1 2 1.4 0.7 1.4 42.7 137 7.0 75.0 75.0 60.2 6.5 2.1 1.3 6.5 5.7 2.4 63.4 9.9 12.6'Y94 2 1 2 1.4 0.7 1.4 43.2 15.8 7.1 75.0 75.0 60.6 6.6 2.3 1.3 6.4 3.7 2.4 64.1 10.0 12.31995 2 1 2 1.4 0.7 1.4 43.7 13.9 7.2 75.0 75.0 61.5 6.7 2.1 (.3 6.3 3 7 2.4 64.8 10.1 12.41996 3 I 3 2.1 0.7 2.1 44.6 13.9 7.4 75.0 75.0 62.2 6.8 2.1 1.4 6.2 3.7 2.3 65.9 10.3 12.21997 2 2 2 1.4 1.4 3.4 45.2 14.1 7.5 75.0 75.0 62.9 6.9 2.1 1.4 6.3 5 7 2.3 66.8 10.4 12.1(96 3 I 3 2.1 0.7 2.1 46.1 14.2 7.7 75. 0 75.0 63.6 7.0 2.2 (.4 6.0 3.6 2.3 68.0 10.6 11.91999 2 2 2 1.4 1.4 1.4 46.7 14.4 7.8 75.0 75.0 64.3 7.1 2.2 1.4 5.9 3.6 2.3 66.9 10.1 11.82000 3 ' 5 2.1 0.7 2.1 47.6 14.5 8.0 75.0 75.0 65.0 7.2 2.2 1.4 5.8 3.6 2.3 70.1 10.6 11.7

1/ Ass w d t0 be only 705 of the aubuctor qonth2/ Actual figures for 1963.3/ Iron o*1s ass_md not to restart qberat3on.4/ Installed c city: (3.0 M.'Sf lest.lled c-'cIt.: 5.6 .

6/ Installed capecty: 3.7 .

7/ Asa doIncIdenc facter: I

Annes 13Page I of 7

Alternative Expansion PlansFull Bumbuna Option -Western AreaAccelerated Growth Alternative

Fiscal New Thermal Required Surplus/ Energy Firm Approx. Plant Plant Largest Uni1

Year Demand Kingston F/bridge Base Peak Hydro Total .sargin deficit Demand Hydro Thermal additions Retirements Thermal Hydro

(MW) (NW) (HW) (HW) (NW) (MM) (MW) (MM) (Mif) (GWh) Gwh (GWh) (MW) ("

1987 22.1 36.3 2.4 38.7 12.5 4.1 120.0 120.0(Rehabilitation 9.2

1988 26.5 42.2 3.8 46.0 13.2 6.3 144.4 144.0 (Kington 9.1989 28.3 48.1 5.2 53.3 :3.411.6 157.5 157.7(& F/bridge 9.2

1990 29.5 48.1 5.2 53.3 13.610.2 167.3 167.3 9.2

1991 31.6 48.1 5.2 53.3 13.9 7.8 181.8 18'.8 9.21992 34.1 48.1 5.2 53.3 14.3 4.9 198.7 198.7 9.21993 37.4 48.1 5.2 53.4 106.7 21.747.6 220.3 206.0 14.3+2026.7MW HYDRO 9.2 26.71994 42.2 48.1 2.8 53.4 104.3 22.339.8 248.9 206.0 42.9 -301.8MW DIESEL 9.2 26.71995 47.6 48.1 2.8 53.4 104.3 22.933.8 280.4 206.0 74.4 9.2 26.61996 53.0 42.2 2.8 53.4 98.4 23.821.6 312.5 206.0 106.5 -5.91W DIESEL 9.2 26.71997 58.1 42.2 2.8 53.4 98.4 24.316.^ 342.5 206.0 136.5 9.2 26.71998 63.7 36.3 2.8 53.4 92.5 25.2 3.6 375.6 206.0 169.6 -5.9YW DIESEL 0.2 26.719.99 69.2 30.4 80.0 110.4 27.214.0 107.8 368.0 39.8-26.7 MW HYDRf5.94W DIESEL 9.2 26.72000 75.4 30.4 80.0 110.4 27.7 7.3 444.6 368.0 76.6 -201.4MW DIESEL 9.2 26.72001 81.6 30.4 15.0 80.0 125.4 29.514.3 481.0 368.0 113.0 +15M GT Is 26.72002 88.8 18.4 . 125.0 158.4 30,539,1 523.1 718.0 -194.9+3015WE HYDRO-4I3M DIESEL 15 26.7

2003 95.9 9.2 15.0 125.0 149.2 31.222.1 565.3 718.0 -152.7 -9.2MW DIESEL 15 26.7 at2004 104.3 9.2 15.0 125.0 149.2 31.713.2 614.5 718.0 -103.3 15 26.7

2005 112.6 15.0 185.0 200.0 40.547.4 663.4 1148.0 -484.6+30404W HYDRO-9.2MW DIESEL 15 352006 122.2 15.0 185.0 200.0 40.537.3 720.5 1148.0 -427.5 15 35

2007 131.9 15.0 185.0 200.0 41.127.0 777.3 1148.0 -370.7 15 35.'008 143.1 15.0 185.0 200.0 41.715.2 843.5 1248.0 -404.5 15 35

2009 154.3 30.0 185.0 215.0 47.413.3 909.3 1248.0 -338.7 .15W GT 15 35

2010 167.3 30.0 185.0 215.0 42.9 4.8 986.3 1248.0 -261.7 15 352011 180.3 30.0 305.0 335.0 48.4106.3 1062.7 1248.0 -185.3+3040MW HYDRO 15 402012 195,4 30.0 305.0 335.0 49.390.0 1151.8 1248.0 -96.2 15 40

2013 210.4 30.0 305.0 335.0 50.274.4 1240.3 1248.0 -7.7 15 40

2014 227.9 30.0 305.0 335.0 51.255.9 1343.4 '248.0 95.4 is 40

2015 245.3 30.0 305.0 335.0 52.237.5 1445.6 1248.0 197.4 15 40

2016 265.5 30.0 305.0 335.0 53.416.1 1564.7 1248.0 316.7 IS 402017 285.4 60 30.0 305.0 395.0 65.344.3 1682.4 1248.0 434.4+60MW as 60 402018 308.7 60 30.0 305.0 395.0 67.019.3 1819.6 1248.0 571.0 60 402019 331.7 120 30.0 305.0 455.0 74.149.2 1955.0 1248.0 707.0+60Wki CFS 60 40

2020 363.3 120 30.0 305.0 455.0 76.715.0 2141.5 1248.0 893.5 60 40

Note: CFS z Coal-fired steam plantGT = Gas turbine plantDIESEL = Diesel plantHYDRO = Hydro-electric plant at BumbunaHydro capacity added in 2005 of 3020WH atYiben by fitting new runners to existing 3015(4W turbines

Annew 13Page 2 of 7

Alternative Expansion Plans

Bumbuna Phase I Option -Western AreaAccelerated Gfowth Alternative

Fiscal New Thermal Required Surplus/ Energy firm Approx. Plant Plant Largest unit

Year Demand Kingston F/bridge Base Peak Hydro Iotal margin deficit Demand Hydro Thermal additions retirements Thermal Hydro

(MW I ;mw) (M1) 1MW) (94W) (MW:. (MW) (MW) (NW) (GWlh ) iGwh ) (GWh 1 (MW) (MN)

1987 22.1 36.3 2.4 38.7 12.5 4.1 120.0 120.0 (Rehabilitation 9.2

1988 26.5 42.2 3.8 46.0 13.2 6.5 144.0 144.0 (Kington 9.2

1989 28. 48.1 5.2 53.3 13,4 11.6 157.5 157.5 (9 F/bridqe 9.2

1990 29.5 48.1 5.2 53.3 13.6 10.2 :67.3 167.3 9.2

1991 31.6 48.1 5.2 53.3 13.9 7.8 181.1 181,8 9.2

1992 54.1 48.1 5.2 53.3 14.3 4.9 198.7 198.7 9.2

'993 37.4 48.1 5.2 53.4 106.7 21.7 47.6 220.3 206.0 14.3 +2f26.7MWHYJRO 9.2 26.7

1994 42.2 48.1 2.8 53.4 104.3 22.3 39.8 248.9 206.0 42.9 -31.8MW DIESEL 9.2 26.7

1995 47.6 48.1 2.8 53.4 104.3 22.9 33.8 280.9 206.0 74.4 9.2 26.7

1996 3.0 42.2 2.8 53.4 98.4 23.8 2 .6 512.5 206.0 106.5 -5.9MW DIESEL 9.2 26.7

1997 58". 47.2 2.8 53.4 98.4 24.S 16.0 342.5 206.0 l36.5 9.2 26.7

1998 65.7 36.3 2.8 53.4 92., 25.2 3.6 375.6 206.0 169.6 -5.91W DIESEL 9.2 26.7

1999 69.2 30.4 30.0 53.4 113.8 35.6 9.0 407.8 206.0 201.8 +30MW CFS -5.9!W DIESEL 30 26.7

2000 75.4 30.4 30.0 53.4 113.8 36.2 2.2 444.6 206.0 238.6 -2f1.4MW DIESEL 30 26.7

2001 8'.6 30.4 30.0 15.0 53.4 128.8 37.5 9.7 481.0 206.0 275.0 +15MW GT 30 26.7

2002 88.8 18.4 60.0 15.0 53.4 146.9 38.9 19.1 523.1 206.0 317.' .309W CFS -413.MW DIESEL 30 26.7

2005 9S.9 9.2 60.0 15.0 53.4 131.6 39.4 2.5 565.3 206.0 359.3 -9.2MW DIESEL 30 26.7

2004 104.5 9.2 60.0 30.0 53.4 152.6 1(0.8 7.S 614.5 206.0 408.5 .15W GT 30 26.7

2005 112.6 90.0 30.0 53.4 173.4 42.4 18.4 663.4 206.0 457.4 *30MW CFS -9.2MW DiESEL 30 26.7

2006 122.2 90.0 30.0 53.4 173.4 43.6 7.6 720.5 206.0 514.5 30 26.7

2007 13i.9 30.0 30.0 53.4 203.4 45.5 26.0 777.3 206.0 571.3 +30MW CFS 30 26.7

2008 1435. 120.0 30.0 53.4 203.4 46.8 1i.5 843.5 206.0 637.5 30 26.7

2009 14.5 120.0 30.0 53.4 203.4 48.2 0.9 909.3 206.0 703.' 30 26.7

20'0 167.5 120.C 30.0 53.4 233.4 50.5 15.6 986.3 206.0 780.3 +30MW GT 30 26.7

2011 '80.3 150.0 30.0 53.4 293.4 77.1 35.4 1062.7 206.0 856.7 *60MW CFS 60 26.7

2012 19I.4 210.0 30.0 53.4 293.4 79.7 18.3 I511.8 206.0 945.8 60 26.7

2013 210.4 210.0 30.0 53.4 293.4 81.7 1.3 1240.3 206.0 1034.3 60 26.7

2014 227.9 210.0 60.0 53.4 323.4 84.9 10.6 1343.4 206.0 1137.4 +30MW GT 60 26.7

2015 245.1 120.0 75.0 53.4 338.4 87.7 5.4 '445.6 206.0 1239.6 +15MW GT 60 26.7

2016 5F-1 * 270.0 75.0 53.4 398.4 91.8 41.1 1564.7 206.0 1358.7 +60MW CFS 60 26.7

2017 285.4 270.0 75.0 53.4 398.4 94.5 18.5 1682.4 206.0 1476.4 60 26.7

2018 308.Z 330.0 75.0 53.4 458.4 98.8 50.9 1819.6 206.0 1613.6 +60MW CFS 60 26.7

2019 331.7 330.0 75.0 53.4 458.4 102.0 24.7 1955.0 206.0 1749.0 60 26.7

2020 365.5 330.0 90.0 53.4 473.4 106.6 x,5 2141.5 206.0 1935.5 +15M GT 60 26.7

Note CFS - Coal-fired steam plantCT = Gas turbine plantOIESiLt = D-ese! plantNYC?O - Hydro-electric plant at Bumbuna'Y ben

Annex 13

Pe" 3 of 7

Alternative Expansion Plens

Reduced Bumbuna Option -Western AreaAccelterated Growth Alternative

Fiscal New Thermal Required Surplus/ Energy Firm Anprox. Plant Plant Largest Unit

Year Demand Xingsron F/bridge Base Peak Hydro Total Margin deficit Demand Hydro Thermal additions retirements Thermal Hydro

(MW) (Ne) (MW) (MM) (MW) (W) (MW) (MW) (MN) Gwh IGWh) (GWh) (U) 1Wk)

1987 22.1 36.3 2.4 38.7 12.5 4.1 120.0 120.0 (Rehabilitation 9.2

1988 26.6 42.2 3.8 46.0 13.2 6.3 144.0 144.0 (Kington 9.2

1989 28.3 48.t 5.2 53.3 13.4 11.6 157.5 157.5 b F/bridge) 9.2

1990 29.5 48.1 5.2 53.3 13.6 10.2 167.3 167.3 9.2

1991 31.6 48.1 5.2 53.3 13.9 7.8 181.8 181.8 9.2

1992 34.1 48.1 5.2 53.3 14.3 4.9 198.7 198.7 9.2

1993 57.4 48.1 5.2 47.0 100.3 19.8 43.1 220.3 157.0 63.3 .2023.5MW HYDRO 9.2 23.5

1994 42.2 48.1 2.8 47.0 91.9 20.4 35.3 248.9 157.0 91.9 -3f.8141 DIESEL 9.2 23.5

1995 47.6 48.1 2.8 47.0 97.9 20.9 29.4 280.4 157.0 123.4 9.2 23.5

1996 53.0 42.2 2.8 47.0 92.0 21.7 17.3 312.5 157.0 155.5 -5.9Dm DIESEL 9.2 23.5

1997 58.1 42.2 2.8 47.0 92.0 22.3 11.6 342.5 157.0 185.5 9.2 23.5

1998 63.7 36.3 2.8 15.0 47.0 101.1 22.5 11.9 375.6 157.0 218.6 +15M4W GT -5.9MW DIESEL 15 23.5 1

1999 69.2 50.4 30.0 15.0 *7.0 122.4 35.2 18.0 407.8 157.0 250.8 +30(W CXS -5.9W4 DIESEL 30 23.5

2000 75.4 30.4 30.0 15.0 47.0 122.4 35.9 11.1 444.6 157.0 287.6 -201.4Mk DIESEL 30 23.5

2001 81.6 30.4 30.0 15.0 47.0 122.4 36.6 4.2 481.0 157.0 324.0 30 23.5

2002 88.8 18.4 60.0 15.0 47.0 140.4 38.2 13.4 523.1 157.0 366.1 +30MW CFS -403MM DIESEL 30 23.5 1

2003 95.9 9.2 60.0 30.0 47.0 146.2 39.2 11.1 565.3 157.0 408.3 +15W GT -9.2tW DIESEL 30 23.5

2004 104.3 9.2 90.0 30.0 47.0 176.2 41.1 30.8 614.5 157.0 457.5 +30MW CFS 30 23.5

2005 112.6 90.0 30.0 47.0 167.0 41.9 12.5 663.4 157.0 506.4 -9.2tW DIESEL 30 23.5

2006 122.6 90.0 30.0 47.0 167.0 43.1 1.7 720. 151.0 i63.5 30 23.5

2007 131.9 120.0 30.0 47.0 197.0 45.1 20.0 777.3 157.0 620.3 +30YW CFS 30 23.5

2008 143.1 120.0 30.0 47.0 197.0 46.5 7.4 843.5 157.0 686.5 30 23.5

2009 154.3 150.0 30.0 47,0 227.0 48.6 24.1 909.3 157.0 752.3 +30tW CFS 30 23.5

2010 167.3 150.0 45.0 47.0 242.0 50.6 24.1 986.3 157.0 829.3 +15h1 GT 30 23.5

2011 180.3 210.0 45.0 47.0 302.0 78.5 43.1 1062.7 157.0 905.7 .60MW CFS 60 23.5

2012 195.4 210.0 45.0 47.0 302.0 80.6 26.0 1151.8 157.0 994.8 60 23.5

2013 210.4 210.0 45.0 47.0 302.0 82.6 9.0 1240.3 157.0 1083.3 60 23.5

2014 227.9 210.0 60.0 47.0 317.0 85.4 3.7 1343.4 157.0 1186.4 .15W GT 60 23.5

2015 245.3 270.0 60.0 47.0 377.0 89.2 42.5 1445.6 157.0 1288.6 +61HW CFS 60 23.5

2016 265.5 270.0 60.0 47.0 377.0 92.0 19.5 1564.7 157.0 1407.7 60 23.5

2017 285.4 270.0 75.0 47.0 392.0 95.0 11.6 1682.4 157.0 1525.4 +1"W GT 60 23.5

2018 308.7 330.0 60.0 47.0 437.0 99.1 29.2 1819.6 157.0 1662.6 +60"W CFS -15P GT 60 23.5

2019 331.7 330.0 60.0 47.0 37.0 102.3 3.0 1955.0 157.0 1798.0 60 23.5

2020 363.3 330.0 90.0 47.0 467.0 107.2 -3.5 2141.5 157.0 1984.4 +30MW GT 60 23.5

Note: OFS = Coal-fired steam plant

GT * Gas turbine plant

DIESEL = Diesel plant

HYORO Hydro-electric plant at Buebuna/Ylben

- 145 -

Annex 13

Page 4 of 7

Alternative Expansion PlansThermal Option - Western Area

Accelerated Growth Alternative

Fiscal New Thermal Required Surplus/ Plant Plant Largest unityear Dmand Kingtom F/bridge Pase Peak Total margin Deficit Additions Retirements Thermal

(MN) (MN) (S ) (M ) (M ) (M ) (MN) (MN) (M )

1967 22.1 36.3 2.4 38.7 12.5 4.1 (Rehabilitation 9.21968 26.5 42.2 3.8 46.0 13.2 6.3 (Kington 9.21909 28.3 48.1 5.2 53.3 13.4 11.6 (S F/bridge) 9.21990 29.5 48.1 5.2 53.3 13.6 10.2 9.21991 31.6 48.1 5.2 53.0 13.9 7.8 9.21992 34.1 48.1 5.2 53.0 14.3 4.9 9.21683 37.4 48.1 5.2 15.0 68.3 20.6 10.3 *154 DIESEL 151994 42.2 48.1 2.8 15.0 65.9 21.3 2.4 -3W.8W DIESEL 15i995 47.6 48.1 2.8 30.0 80.9 22.1 11.2 +15MW DIESEL 151996 53.0 42.2 2.8 45.0 90.0 23.0 14.1 *1 5b DIESEL -5.94W DIESEL 151997 58.1 42.2 2.8 45.0 90.0 23.7 8.2 151998 63.7 36.3 2.8 60.0 99.1 24.6 10.8 +15MW DIESEL -5.9MW DIESEL 151999 69.2 30.4 75.0 105.4 25.4 10.8 +15MW DIESEL -5.9MW DIESEL 152000 75.4 30.4 105.0 135.4 41.3 18.7 .30MW CFS -2,1.411 DIESEL 302001 81.6 30.4 105.0 135.4 42.2 11.6 302002 88.8 18.4 105.0 15.0 138.4 45.3 6.3 +15MW GT -403MW DIESEL 302003 95.9 9.2 135.0 15.0 159.2 44.4 18.9 +30MW CFS -9.2Mw DIESEL 302004 104.3 9.2 135.0 15.0 159.2 45.6 9.3 302005 112.6 135.0 30.0 165.0 46.9 5.5 +15MW GT -9.2MW DIESEL 302006 122.2 135.0 45.0 180.0 48.3 9.5 +15MW GT 302007 131.9 135.0 45.0 210.0 49.8 28.3 +* Mw CFS 302008 143.1 135.0 45.0 210.0 51.5 15.4 302009 154.3 135.0 45.0 210.0 53.1 2.6 302010 167.3 165.0 45.0 240.0 55.1 17.6 +30MW CFS 302011 180.3 195.0 45.0 300.0 87.0 32.7 +60MW CFS 602012 195.4 255.0 45.0 300.0 89.3 15.3 602013 210.4 255.0 45.0 300.0 91.6 -2.0 602014 227.9 315.0 45.0 360.0 94.2 37.9 .604W CFS 602015 245.3 315.0 45.0 360.0 96.8 17.9 602016 265.5 375.0 45.0 420.0 99.8 54.7 .60MW CFS 602017 285.4 375.0 45.0 420.0 102.8 31.8 602018 308.7 375.0 45.0 420.0 106.3 5.0 602019 331.7 375.0 75.0 450.0 109.8 8.5 +30MW GT 602020 363.3 375.0 E'5.0 480.0 114.5 2.2 +30mw GT 60

Notes: CFS Coal-fired steam plantGT - Gas turbine Dan tDIESEL D Oiesel plantHYORO = Hydro-electric Planit at Bumbuna/Yiben

Annex 13Page 5 of 7

Alternative Expansion PlansReduced Bumbuna Option

Western Area - Base Case Alternative

's" Neow Thernal Required Surplus/ Energy Firm Approm Plant Plant Largest unit

year Oemand Kingtom F/bridge Base Peak Hydro Total Margin deficit Demand Hydro 'hermal additions retirements Thermal Hydro

(MW) (IMIMII II (MN) (N W (1 1) (Mh) () MN) ) 14MW) (Guh) (Gwh) lGOh) 'MW) (MW)

1987 24.9 36.3 2.4 38.7 12.9 0.9 120.0 120.0 (Rehabilitation 9.2

1988 25.; 42.2 3.8 46.0 13., 7.9 15720 132.0 (Kingtom 9.21989 24.1 48.1 5.2 53.3 12.8 16.4 141.2 141.2 (4 F/bridge 9.2

1990 24.1 48.1 5.2 53.3 12.8 16.4 141,4 141.4 9.21991 24,6 48.1 5.2 53.3 12.9 15.8 144,4 144.4 9.2

1992 25.4 48.1 5.2 53.3 13.0 14,9 149.1 149,1 9.2

1993 26,4 48.1 5.2 53.3 13.2 15.7 154.9 154.9 9.2

1994 27.5 48.1 2.8 60.9 13.3 10.0 161.6 161.6 -30.8M" DIESEL 9.2

1995 28.8 48.1 2.8 50.9 13.5 8.6 168.9 168.9 9.2

1996 30.1 42.2 2.8 '5.0 13,7 1,2 176.7 176.7 -5.9MW DIESEL 9.2

1997 31.8 42.2 2.8 47,0 92.0 19.7 40.5 186.9 157.0 29.9 .2023.5MW HYDRO 9.2 23.5

1998 33.5 36.3 2.8 47.0 86.1 20.2 32.3 196.9 157.0 39.9 -5.91W DIESEL 9.2 23.51999 35.6 30.4 47.0 77.4 21.1 20.7 209.2 157.0 52.2 -5.9MW DIESEL 9.2 23.5

2000 37.6 30.4 47.0 77.4 21.2 18.5 220.9 157.0 63.9 21.4MM DIESEL 9.2 23.5

2001 40.0 50.4 47.0 77.4 21.5 15.9 234.9 157.0 77.9 9.2 23.5

2002 42.3 18.4 15.0 47.0 80.4 23.8 14.2 248.4 157.0 91.4 +15MW DIESEL -43M0MW DIESEL 15 23.5

2003 45,0 9.2 30.0 47.0 86.2 23.9 17,2 264.4 157.0 107.4 +15MW DIESEL -9.2MW DIESEL 15 23.5

2004 47.6 9.2 30.0 47.0 86.2 24.2 14.4 279,6 157.0 122.6 is 23.5

2005 50.7 30.0 7.5 47.0 84.5 24.5 9.3 297.5 157.0 140.5 +7.54W GT -9.2MW DIESEL 15 23.5

2006 53.6 30.0 7.5 47.0 84.5 24.8 6.1 314.7 157.0 157.7 IS 23.5

2007 57.1 30.0 7.5 47.0 84.5 25.1 2.3 334.9 157.0 177.9 15 23.5

2008 60.3 30.0 15.0 47.0 92.0 25.3 6.3 334.2 157.0 197.2 +7.5MW GT 15 23.52009 64.2 30.0 15.0 47.0 92.0 25.7 2.1 376.9 157.0 219.9 15 23.5

2010 67.9 30.0 22.5 47.0 99.5 26.0 5.6 398.7 157.0 241.7 *7.5Mh GT 15 23.5

201! 72.3 50.0 22.5 47.0 119.5 29.4 17.8 424.4 157.0 267.4 *20MW GT 20 23.5

2012 76.4 50.0 22.5 47.0 119.5 29.8 13.2 448.7 157.0 291.7 20 23.5

2013 81.4 50.0 22.5 47.0 119.5 30.4 7.8 477.5 157.0 320.5 20 23.5

2014 86.1 50.0 22.5 47.0 119.5 30.9 2.5 505.1 157.0 348.1 20 23.52015 91.6 50.0 30.0 47.0 127.0 31.6 3.8 537.5 157.0 380.5 .7.5MW GT 20 23.5

2016 96.9 50.0 37.5 47.0 134.5 32.4 5.3 568.5 157.0 411.5 *7.5MW GT 20 23.5

2017 10351 70.0 37.S 47.0 154.5 35.4 18.0 605.1 157.0 448.1 *20FW DIESEL 20 23.520)8 109.0 70.0 37.5 47.0 154.5 34.1 11.4 639.9 157.0 482.9 20 23.52019 116.0 70.0 37.5 47.0 154.5 34.9 3.5 681.1 157.0 524.1 20 23.5

2020 122.7 70.0 45.0 47.0 162.0 35.9 3.4 720.3 157.0 563.3 +7.5MW GT 20 23.5

Note: CfS = Coal-fired steam plantGT = Gas turbine plantDIESEL = Diesel plantHrDRO * lHydro-electric plant at Sumbuna/Yiben

Annex 13Page 6 of 7

Alternative Expansion PlansFull Bumbuna Option - Western Area - Base Case Alternative

Fiscal Now Thersal Required Surplus/ Energy Firm Approx Pgant Plant Largest unitYear Demani Kingtom F/bridge Base Peak HTydro Tetal margin deficit Demand Hydro Thermal additions Reqirements Theroal Hydro(PIW) (MM) (NW) (MS) (MM1) (MN) (PS) (MW) (M"S) (GWh (Gwh) (G"h) (MIF) (M)

1987 24.9 36.3 2.4 38.7 12.9 0.9 120.0 120.0 Rehabilitation 9.21968 25.1 42.2 3.8 46,0 13.0 7.9 132.0 132.0 (Kington 9.21969 24,1 48.1 5.2 53.3 12.8 16.4 141.2 141.2 (& F/bridge) 9.21990 24.1 48.: 5.2 53.3 12.8 16.4 141.4 144.4 9.21991 24.6 48.1 5.2 53.3 12.9 15.8 144.4 149.1 9.21992 25.4 48.1 5.2 53.3 13.0 14.9 149.1 154.9 9.21993 26.4 48.1 5.2 53.3 13.2 13.7 154.9 154.9 -35.8Hd DIESEL 9.21994 27.5 48.1 2.8 50.9 13.3 10.0 161.6 161.6 9.21995 28.8 48.1 2.8 50.9 13.5 1.2 168.9 168.9 -5.91W DIESEL 9.21996 30.1 42.2 2.8 45.0 15.7 -0.8 176.7 176.7 9.21997 31.8 42.2 2.8 45.0 14.0 36.6 186.9 206.0 -3.1 +2026.7MIW HYDRO -5.9WI DIESEL 9.21998 33.5 36.3 2.8 53.4 92.5 22.4 24.7 196.9 206.0 3.2 -5.9MW DIESEL 9.21999 35.6 30.4 53.4 83.8 23.4 22.6 209.2 206.0 14.9 -21.4HW DIESEL 9.2 26.72000 37.6 30.4 53.4 83.8 23.6 20.0 220.9 206.0 28.9 9.2 26.72001 4c.0 30.4 53.4 83.8 23.8 4.1 234.9 20E.0 42.4 -43M#W DIESEL 9.2 26.72002 42.3 18.4 53.4 71.8 25.4 5.8 248.4 206.0 58.4 .15W GT -9.2MW DIESEL 9.2 26.72003 45.0 9.2 15.0 53.4 77.6 26.7 3.0 264.4 206.0 73.6 15 26.72004 47.6 9.2 15.0 53.4 77.6 26.9 16.1 279.6 368.0 -70.5 +26.7MW HYORO -9.210 DIESEL 15 26.72005 50.7 15.0 80.0 95.0 28.2 13,0 297.5 368.0 -53.3 15 26.72006 53.6 15.0 80.0 95.0 28.4 9.3 314.7 368.0 -33.1 is 26.72007 57,1 15.0 80.0 95.0 28.6 5.8 334.9 368.0 -13.8 Is 26.72008 60.3 15.0 80.0 95.0 28.8 1.7 354.2 368.0 8.9 15 26.72009 64.2 15.0 80.0 95.0 29.1 42.5 376.9 718.0 -319.3 *26.7MW HYDRO 15 26.72010 66.( 15.0 125.0 140.0 29.6 37.9 391.7 718.0 -293.6 15 26.7201, 72.3 15.0 125.0 140.0 29.8 33.5 424.4 718.0 -269.3 15 26.72012 76,4 15.0 125.0 140.0 30.1 23.3 448.7 718.0 -240.5 15 26.72015 81.4 15.0 125.0 140.0 30.4 28.5 477.5 718.0 -212.9 'S 26.72014 86.1 15.0 125.0 140.0 30.7 23.3 505.1 718.0 -180.5 15 26.72015 91.6 15.0 125.0 140.0 31.0 17.4 537.5 718.0 -149.5 15 26.72016 96.9 15.0 125.0 140.0 31.3 11.8 568.5 7i8,0 -112.9 15 26.72017 1035. 15.0 125.0 140.0 31.7 5.2 605.1 718.0 -78.1 IS 26.72018 109.0 15.0 125.0 140.0 32,1 -1.1 639.9 718.0 -78.1 15 26.72019 116.0 30.0 125.0 155.0 32.5 6.5 681.1 718.0 -36.9 +15MWGT 15 26.72020 122.? 30.0 125.0 155.0 32.9 -0.7 720.3 718.0 2.3 15 26.7

Note CJS = Coal-fired steam plantGI = Gas turbine plantDIESEL = Diesel plantHYDC0 - Hydro-electric plant at Bumbuna/Yiben


Alternative Expansion PlansThermal Option - Western Area Base Case Alternativo

Fiscal New Thermal Required Surplus/ Plant Plant Largestyear Demand Kingtom F/bridge Base Peak Total margin deficit additions retirements unit

MW MW MW MW MW MW MW MW M

1987 24.9 36.3 2.4 38.7 12.9 0.9 (Rehabilitation 9.21988 25.1 42.2 3.8 46.0 13.0 7.9 (Kington 9.21989 24.1 48.1 5.2 53.3 12.8 16.4 (& F/bridge 9.21990 24.1 48.1 5.2 53.5 12.8 16.4 9.21991 24,6 48.1 5.2 53.5 12,9 15.8 9.21992 25.4 48.1 5.2 53.5 13.0 14.9 9.21993 26.4 48.1 5.2 53.5 13.2 13.7 9.21994 27.5 48.1 2.8 50.9 13.3 10.0 -31.804W DIESEL 9.21995 28.8 48.1 2,8 50.9 13.5 8.6 9.21996 30.1 42.2 2.8 45.0 13.7 1.2 -5.9MW DIESEL 9.21997 31.8 42.2 2.8 10.0 55.0 14.8 0.4 +IOMW DIESEL 101998 33.5 36.3 2.8 10.0 49.1 15.0 0.5 -5.9MW DIESEL 101999 35.6 30.4 20.0 50.4 15.3 -0.6 +10MW DIESEL -5.9MW DIESEL 102000 37,6 30.4 20.0 7.5 57.9 15.6 4.6 +7.5MW GT -201.4MW DIESEL 102001 40.0 30.4 20.0 7.5 57.9 16.0 1.9 102002 42.3 18.4 20.0 22.5 60.9 16.3 2.2 +207.5MW GT -413MW DIESEL 102003 45.0 9.2 35.0 22.5 66.7 21.8 -0,1 +1510W DIESEL -9.2MW DIESEL 152004 47.6 9.2 35.0 30.0 74.2 22.1 4.4 +7.5MW GT 152005 50.7 50.0 30.0 80.0 22.6 6.7 +15MW DIESEL -9.2MW DIESEL 152006 53.6 50.0 30.0 80.0 23.0 3.3 152007 57.1 50.0 30.0 80.0 23.6 -0.6 152008 60.3 50.0 37.5 87.5 24.1 3.1 +7.5MW GT 152009 64.2 70.0 37.5 107,5 29.6 13.7 +20MW DIESEL 202010 67.9 70.0 37.5 107.5 30.2 9.4 202011 72.3 70.0 37.5 107.5 30.8 4.3 202012 76.4 70.0 37.5 107.5 31.5 -0.4 202013 81.4 70.0 45.0 115.0 32.2 1.4 +7.5MW GT 202014 86.1 90.0 45.0 135.0 32.9 16.0 +20MW DIESEL 202015 91.6 90.0 45.0 135.0 33.7 9.7 202016 96.9 90.0 45.0 135.0 34.5 3.6 202017 103.1 90.0 52.5 142.5 35.5 3.9 +7.5MW GT 202018 109.0 110.0 52.5 162.5 36.4 17.1 +20MW DIESEL 202019 116.0 110.0 52.5 162.5 3'.4 9.0 202020 122.7 110.0 52.5 162.5 38.4 1.4 +7.5MW GT -7.5MW GT 20

Note: CFS Coal-fired steam plantri'T a Gas turbine plantDIESEL a Diesel plantHYDRO = Hydro-electric plant at Bumbuna/Yiben

- 149 -Annex 14Page I of 9

BUMBUNA CAPITAL cOST ESTIMATES(Economic Costs In 1966 USS million)

Full Project - Phase I to 4

Phasing of expenditure (YC * first year of service)Local Foreign Total YC-5 YC-4 YC-3 YC-2 YC-1 YC Total

Phase ICivil works 15.74 73.47 89.21

Less work completed 3.09 14.41 17.50Civil works outstanding 12.65 59.05 71.71 0.0% 25.0% 25.0% 25.0% 20.0% 5.0% I00.0%

MlE plant 1.73 21.55 23.28 O.0% 25.0% 0.0% 20.0% 45.0% 10.0% 100D.0

Transmission 8.84 18.41 27.25 0.0% I5.0% 25.0% 30.0% 20.0% 10.0% 100.0%

Resottlement 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%…;_______ -----------------------------------------------------------------------

Tr,,tal construction cost 23.23 99,0 122.34

Physical contingencies 2,96 12.85 15.81 0.0% 23.0% 20.0% 25.0% 25.0% 7.0% 100.0%

Eng. & Admin. 2.62 11.19 13.80 20.0% vO.0% 23.0% 18.0% 15.0% 4.0% 100.0%

1.8% 22.5% 20.5% 24.5% 23.9% 6.8% 100.0%

Total Cost 28.80 123.05 151.85 2.76 34.22 31.08 37.20 36.29 10.30 151.85

Phase 2

Civil works 12.15 56.90 69,05 0.0% 25.0% 25.0% 25.0% 20.0% 5.0% 100.0%

M & F Plant 0.68 9.28 9.96 0.0% 25.0% 0.0% 20.0% 45.0% 10.0% 100.0%

Transmission 9.62 13.71 23.33 0.0% 15.0% 25.0% 30.0% 2X.0% 10.0% 100.0%

Resettlement 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total construction cost 22.45 79.90 102,35

Physical contingencies 2.85 10.83 13.69 0.0% 23.0% 20.0% 25.0% 25.0% 7.0% 100.0%

Eng. & Admin. 2.53 9.07 11.60 20.0% 20.0% 23.0% 18.0% 15.0% 4.0% 100.0%

1.8% 22.5% 22.3% 24.9% 22.4% 6.4% 100.0%

Total cost 27.83 99.80 127.64 2.32 28.72 28.50 31.77 28.12 8.20 127.64

Phase 3A

CivIl works 6.09 23.67 29.76 0.0% 0.0% 33.0% 30.0% 30.0% 5.0% 100.0%

M&E plant 2.28 30.95 33.23 0.0% 25.0% 0.0% 20.0% 45.0% 10.0% 100.0%Transmission 0.72 6.55 7.27 0.0% 0.0% 25.0% 40.0% 25.0% 10.0% 100.0%

Resettlement 2.08 1.79 3.87 0.0% 0.0% 50.0% 50.0% 0.0% 0.0% 100.0%

Total construction cost 11.16 62.96 74.12

Physical contingencies 1.42 7.48 8.90 0.0% 5.0% 24.8% 30.6% 32.6% 7.0% 100.0%

Eng. & admin. 1.26 7.04 8.30 20.0% 20.0% 23.0% 18.0% 15.0% 4.0% 100.0%

Total cost 13.84 77.49 91.33 1.66 10.41 17.69 24.93 30.14 6.49 91.33

- 150 -

Annex 14Page 2 of 9

BLH3UNA CAPITAL COST ESTI1'ATES (continued)

(Economic Costs in 1986 USS Mil'on)Full Project - Phaso I to 4

Phasing of expenditure (YC * first year of service)Local Foreign Total YC-5 YC-4 YC-3 YC-2 YC-I YC Total

Phase 38

Civil works 9.25 31.12 40.37 0.0% 0.0% 33.0% 31,0% 31.0% 5.0S 100.0%M&E plant 0.25 2.58 2.83 0.0% 0.0% 0.0% 45.0% 45.0% 10.0% 100.0%Transmissio.i 0.95 9.17 10.12 0.0% 0.0% 25.0% 40.0% 25.0% 10.0% 100.0%

Resettlement 4.13 3.56 7.69 0.0% 0.0% 50.0% 50.0% 0.0% 0.0% 100.0%-------------------------------------- ,--------------------------__----------__--

Total construction cost 14.59 46,43 61.02

Physical contingencies 1.92 6.20 8.12 0.0% 0.0% 24,8% 35,6% 32.6% 7.0% 100,0%Eng. & Admin. 1.65 5.26 6.91 0.0% 25.0% 27.0% 23.0% 20.0% 5.0% 100.0%

0.0% 2.3% 31.0% 34.4% 26.8% 5.6% 100.0%Total Cost 18.16 57.89 76.05 0.0 1.73 23.58 26.16 20.35 4,23 76.05

Phase 4

Civil works 4.88 25.01 29.89 0.0% 0.0% 33.0% 31.0% 31.0% 5.0% 100.0%

M & E P;ant 2.69 34.15 36.83 0.0% 25,0% 0.0% 20.0% 45.0% 10,0% 100.0%Transmission 0.54 5.09 5.63 0.0% 0.0% 25.0% 40.0% 25.0% 10.0% 100.0%Resettlement 0.00 0,00 0.00 0.0% 0.0% 50.0% 50.0% 0.0% 0.0% 100.0%

Total construction cost 8.10 64.25 72.35Physical contingencies 1.05 7.68 8.73 0.0% 5.0% 24.8% 30.6% 32.6% 7.0% 100.0%Eng. & Admin. 0.92 7.19 8.1 20.0% 20.0% 23.0% 18.0% 15.0% 4.0% 100.0%

1.8% 12.6% 17.2% 25.8% 35.1% 7.5% 100.0%Total cost 10.07 79.12 89.19 1.62 11.27 15.30 23.0? 31.31 6.68 89.19

Note: Indices used to update from 1980 Report to 1986 prices:

Local 1.4920

Foreign 1.0288

Standard conversion fastor:

Local costs 0.8

- 151 -

Annex 14Page 3 of 9

BUMEUNA CAPITAL COST ESTIMATES(Economic Costs in 1986 USS million)

Reduced Project - Phase I

Phasing of expenditure (YC a first year of service)Local Foreign Total YC-5 YC-4 YC-3 YC-2 YC-l YC Total

Phase ICivii works 5.14 45.87 51.01 0.0 25.0% 25.0% 25.0% 20.0% 5.0% 100.0%M&E plant 0.85 14.08 14.93 0.0% 25.0% 0.0% 20.0% 45.0% 10,0% 00.0%Transmission 2.95 7.89 10.83 0.0% 15.0% 25.0% 30.0% 20.0% 10.0% 100.0%Resettlement 0.00 0.00 0.00 0.0% 0.0% 0.0% 00% O .0% 0.0% 0.0%

Total construction cost 8.94 67.84 76.77Physical contingencies 1.15 9.08 10.23 0.0% 23.0% 20.0% 25.0% 25.0% '.0% 100.01Eng. & Admin. t.01 7.69 8.70 20.0% 20.0% 23.0% 18.0% 15.0% 4.0% 100.0%

1.8% 23.2% 20.4% 24.1% 24.0% 6.5% 100.0%Total Cost 11.10 84.60 95.70 1.74 22.20 19.51 23.11 22.95 6.19 95.70

Note: Indices used to update from 1984 Report to 1986 prices:Local 0.8131

Foreign 1.0730Standard conversion factor Local cost 0.8

- 152 - Annex 14

Page 4 of 9

BUMBUNA OUTPUT AND O&M COSTS

Power Output & Energy Production:

Installed Capacity Annual Energy b/ Avg. EnergyBy season c/

by Phase Total Total a/Firm Average Dry Wet

Mw MW MW GWh GWh GWh GWh

Full ProjectPhase 1 2 / 26.7 53.4 52.3 206 343.4 89 254.4Phase 2 26.7 80.0 78.4 568 523.6 206.9 316.7Phase 3A 3 J IS 125.0 122.5 718 867.9 342.8 525.1Phase 38 3 0 20 d/ 185.0 181.3 1148 1188 469.3 718.7Phase 4 3 0 40 305.0 298.0 1248 1428.5 564.4 864.1

Reduced ProjectPhase 1 2 0 23.5 47.0 46.1 157 284.1 63.8 220.3

Operation and Maintenance Costs: e/

Basis Maintenance and Insurance (M&l)Civil works 0.3% p.aPlant & transmission (P&T) 0.75% p.a.

Staffing Phase No. Cost e S20,000 p.a. per personSm

1 40 0.802 44 0.883A 84 1.683B 88 1.764 104 2.08

Total O&M Phase M&I Staffing TotalCivil P&T Total OUM

Sm Sm Sm Sm Sm

Full project 1 0.339 0.458 0.797 0.800 1.5972 0.601 0.817 1.418 0.880 2.2983A 0.713 1.183 1.896 1.680 3.576

3B 0.866 1.301 2.167 1.760 3.9274 0.979 1.687 2.666 2.080 4.766

Reduced project 1 0.193 0.234 0.477 0.800 1.277

Notes: a/ Total capacity less 2% generation & transmission losses.b/ Average energy loss 2% generation & transmission losses.c/ Dry season January to May; Wet season June to November.d/ Incremental increase in output by fitting new runners to existing 3115 MW

turbine at Yiben.e/ Economic costs.


THERMAL PLANT COST AND PEFFORPANCE DATA

Unit Unit max. Average Fuel Var. Fixed Capital SpecificFuel size no. Avail. Heat Rate Cost S/06M 0IW Cost Cap.Cost

HW S Kcai/kWh S/MWh S/MWh S'000 p.a S SAkW

Existing Diesel:

Falconbridge Gas oil 0.8 1 to 3 75 2990 70.6 9.0 62

1.4 4 l 5 75 2990 70.6 9,0

Kingtom Heavy oil 5.9 1 to 3 80 2300 32.2 12.0 6259.2 4 & 5 85 2300 32.2 11.5

3.0 6 to 9 85 2365 33.5 13.0

Candidate:

Diesel Heavy oil 15 1+ 80 2235 31.3 10.9 268 13.38 89220 1+ 80 2255 31.3 10.6 347 17.35 867

Gas turbine Gas oil 7.5 1+ 80 3790 86.2 4.5 76 3.8 507

15 1+ 80 3545 83.8 4.3 120 6.00 400

30 1+ 80 3450 81.5 4.1 206 10.28 343

Steam Heavy cil 30 1 87 2735 37.6 0.9 914 45.72 1524

30 2+ 87 2735 37.6 0.9 585 29.23 974

Coal 30 1 85 2735 23.4 1.0 1456 72.81 2427

30 2+ 85 2735 23.4 1.0 707 35.33 1178

60 1 85 2640 22.6 0.9 2263 113.17 188660 2+ 85 2640 22.6 0.9 1154 57.71 962

Notes: 1. Heat rates and specific fuel costs shown on generated basis and base fuel price scenario (Alt 1)

costs in economic prices.

2. Asset lives - Gas turbines 20 years

- Diesel plant 20 years

- Steam plant 30 years.

3. Capital costs for coal plants Include an allowance for coal delivery and handling equipment. Thisis approximately 101 of the costs of a 4 unit station and would be expended with the first unit.


ACCELERATED GROWTH--BASE FUEL PRICE SCENARIO

(Present value in millions of USS, of capital and operating costs

estimated at 1986 prices)

FuelDiscount Wet Dry O&MRate Capital season season (non-fuel) Total

Full Bumbuna Option 0% 717.6 176.3 179.8 230.4 1304.38% 250.1 9.5 12.9 27.4 299.910% 205.7 4.9 7.7 18.3 236.612% 172.4 2,5 4.9 12.7 192.614% 147.0 1.3 3.3 9.2 161.8

Reduced Bumbuna Option 0% 578.7 525.0 464.0 322.5 1890.2

8% 178.3 41.7 46.9 36.5 303.310% 143.0 24.1 29,8 23.8 220.712% 117.4 14.4 19.7 16.2 167.714% 98.4 8.9 13.6 11.4 132.2

Bumbuna Phase 1 only 0% 627.5 496.0 436.2 329.7 1889.48% 213.1 37.8 40.8 37.3 329.110% 175.3 21.6 25.2 24.3 246.412% 147.4 12.7 16.2 16.5 192.914% 126.3 7.7 10.8 11.7 156.4

Thermal Option 0% 516.9 782.3 551.9 371.1 2222.18% 134.8 90.9 64.1 48.8 338.410% 102.1 60.3 42.5 33.2 238.112% 79.0 41.7 29.4 23.5 173.614% 62.1 29.9 21.1 17.2 130.4

- 155 -

Annex 14Page 7 of 9

ACCELERATED GROWTH-ALTERNATIVE FUEL PRXCE SCENARIO

(Present value in millions of USS, of capital and operating costsestimated at 1986 prices)

FuelDiscount Wet Dry 0&MRate Capital season season (non-fuel) Total

Full Bumbuna Option 0% 717.6 134.7 140.3 230.4 1223.08% 250.1 7.3 10.2 27.4 295.010% 205.7 3.7 6.1 18.3 233.812% 172.4 1.9 3.9 12.7 191.014% 147.0 1.0 2.6 9.2 159.8

Reduced Bumbuna Option 0% 578.7 383.8 341.1 322.5 1626.18% 178.3 30.5 35.0 36.5 280.310% 143.0 17.7 22.4 23.3 206.812% 117.4 10.6 14.9 16.2 159.014% 98.4 6.5 10.3 11.4 126.6

Bumbuna Phase I only 0% 627.5 362.5 320.1 329.7 1639.78% 213.1 27.7 30.3 37.3 308.410% 175.3 15.8 18.8 24.3 234.212% 147.4 9.3 12.1 16.5 185.414% 126.3 5.6 8.1 11.7 150.7

Thermal Option 0% 516.9 587.0 414,1 371.1 1889.08% 134.8 70.0 49.4 48.8 302.9

10% 102.1 46.7 32.9 33,2 215.012% 79,0 32.5 22.9 23.5 157.914% 62.1 23.5 16.5 17.2 119.3

- 156 -

Annex 14Page 8 of 9

BASE CASE-BASE FUEL PRICE SCENARIO(Economic cost in USS million)

(Present value In millions of USS, of capital and operating costsestimated at 1986 prices)

FuelDiscount Wet Dry OU&rate Capital season season (non-fuel) -otal

Full Bumbuna Option 0% 382.8 18.0 17.6 121.1 539.58% 127.2 8.9 7.9 17.9 161.910% 100.0 7.6 6.S 12.5 126.712% 79.6 6.5 5.5 9.1 100.614% 63.9 5.5 4.6 6.8 80.9

Reduced Bumbuna Option 0% 180.0 140.2 259.0 181.7 760.88% 66.3 15.0 27.0 21.4 129,710% 54.1 10.3 17.6 14.3 96.312% 44.7 7.5 12.0 10.0 74.314% 37.3 5.8 8.6 7.3 59.8

Bumbuna Option Phase I only 0% 233.9 113.2 200.9 179.4 726.58% 92.7 13.1 20.9 21.1 147.710% 76.7 9.2 13.6 14.1 113.712% 64.2 6.9 9.3 9.9 90.414% 54.1 5.4 6.7 7.2 73.5

Thermal Option 0% 310.3 317.2 242.5 223.8 1093.78% 62.0 43.5 33.0 29.2 167.610% 43.8 29.9 22.6 19.7 116.012% 31.5 21.3 16.1 13.9 82.914% 23.1 15.7 11.9 10.1 60.8

- 157 -

Anne: 14Page 9 of 9

BASE CASE-ALTERNATIVE FUEL PRICE SCENARIO

(Present value in millions of USS, of capital and operating costsestimated at 1986 prices)

FuelDiscount Wet Dry O&Mrate Capital season season (non-fuel) Total

Full Bumbuna Option 0% 390.4 14.3 14.2 121.1 540.18% 129.4 7.1 6.3 17.9 160,610% 101.6 6.0 5.2 12.5 125.412% 80.7 5.1 4.4 9.1 99.314% 64.8 4.4 3.7 6.8 79.7

Reduced iumbuna Option 0% 180.0 118.8 220.2 181.7 700.78% 66.3 12.3 22.7 21.4 122.710% 54.1 8.4 14.6 14.3 91.412% 44.7 6.1 9.9 10.0 70.714% 37.3 4.6 7.1 7.3 56.3

BumbILia Option Phase 1 only 0% 233.9 95.8 170.8 178.4 679.08% 92.7 '0.7 17.5 21.1 141.910% 76.7 7.4 11.3 14.1 109.612% 64.2 5.5 7.7 9.9 87.314% 54.1 4.3 5.5 7.2 71.2

Thermal Option 0% 310.3 295.2 224.4 223.8 1053.78% 62.0 38.2 29.0 29.2 158.3

10% 43.8 25.9 19.6 19.7 109.112% 31.5 18.3 13.8 13.9 77.5i4% 23.1 13.3 10.1 10.1 56.6

- 158 -

Annex 15

FUTURE COAL AND CRUDE OIL PRICES

1986 1990 1995 2000

Base Projections (for AG and BC Scenarios)

Crude (S/bbl, Avg. OPEC) in current prices 20 23 39 48

in 1986 prices 20 18 25 25

Coal (S/ton, CIF Freetown) in current prices 52 70 89 109

in 1986 prices 52 53 56 56

Alternate Projections (AG and BC)

Crude (S/bbl, avg. OPEC) in current prices 10 13 30 40

in 1986 prices 10 10 19 21

Coal (S/ton, CIF Free!:von) in current prices 44 48 61 77

in 1986 prices 44 37 38 31

Annex 16Page 1 of 2

EFFECT OF BUMBUNA ON FOREIGN EXCHANGE BALANCE,

ACCELERATED GROWTH SCENARIO

(USS'tO0 ia 1986 prices)

Capital expenditures Incremental expenditure Incremental debt Fuel savings in Net incremental effect

Fiscal of alternative in foreign exchange with Lervice wi h the presence of of Bumbuna options on

Year schemes (a) Bumbuna scheme (b) Bumbuna options (c) Bumbuna balance of payments (d)

A B C B-A C-A B-A C-A B-A C-A B-A C-A

1987 1432 1432 1432 0 0

1988 1861 1861 1861 0 0

1989 548 24491 37539 19953 30826

1990 i329 20833 32397 16253 25890 1995 3083 1995 3083

1991 9366 23112 37188 11455 23185 3621 5672 3621 5672

'992 12711 22949 36292 8532 19651 4766 7990 4766 7990

1993 4014 6192 10295 1815 5234 7282 12524 .5482 7564 850 5160

1994 10035 0 0 -8363 -8363 8652 14948 7488 8381 1164 6567

1995 12711 0 30583 -10593 14893 8604 15571 8509 9424 95 61471996 4014 52548 28655 4044_-' 20534 7723 18032 9099 10140 -k74 7892

1997 10035 18101 32025 6722 18325 11450 19692 9649 10729 18IJ 8963

1998 61051 4523 40053 47117 -17498 10942 19955 9918 11349 1'J24 8606

1999 20615 14240 30289 -5313 8062 9646 20392 11847 15371 -2201 5021

2000 4892 15899 26433 9173 17951 12690 21176 9485 14136 3205 7040

fa) Capital expenditure estimated as an economic cost (equivalent to 96% of financial costs; SCF = 0.96).

(b) Based on foreign exchange component of capital expenditures, and which are assumed to be 80% of financial costs.

Figures give incremental foreign exchange outlays for the twc hydro schemes relative to the thermal option.

(c, Based on repayment over 12 years following a 3 year grace period; rate of interest 10%.

(d) Savings (-) with Bumbuna options.

A: Full Thermal Scheme

B: Reduced Bumbuna Scheme

C: Full Bumbuna Scheme

B-A: Reduced Bumbuna relative to thermal option

C-A: Full Bumbuna relative to thermal option

Annex 16Page 2 of 2

EFFECT OF BUMHUNU ON FOREIGN EXChANGE BALANCE

(Base Case Scenario)

tiSS'900 in 1986 prices

Capital expenditures Incremental expend;ture ncremental debt Fuel savings Net Incremental *ffect

Fiscal of alternative In foreign exchange with Service with in the presence of Bumbuna options on

Year schemes (a) the Bumbuna scheme (b) Bambuna options (c) of Bambuna balance of payments (d)

A B C B-A C-A B-A C-A B-A C-A B-A C-A

1993 0 23944 0 19953 0 0 0 0 0 0 0

1994 0 19504 36991 16253 30826 1995 0 0 0 1995 0

1995 9366 23112 31069 11455 18086 5621 3083 0 0 3621 3063

1996 3345 22949 37188 16337 28203 4766 4891 0 0 4766 4891

1997 1035 6192 36292 4298 29381 8063 7711 7742 7742 321 -31

1998 6005 0 10295 -5004 3575 9681 13218 7806 7806 1875 5412

1999 1619 0 0 -1349 -1349 9833 14826 8128 8128 1705 6696

2000 5510 0 0 -4592 -4592 10662 16634 8610 8610 2052 8024

(e) (-) 1

2001 10028 17980 8000 8000 2028 9960

2002 9042 17391 8000 8000 1042 9391 o

2003 8402 16361 8000 8000 402 8361

2004 7503 15073 8000 8000 -497 7073

2005 7025 14205 8000 8ooo -975 6205

2006 6547 13337 8000 a000 -1455 5337

2007 6069 12469 8000 8000 -1931 4469

2008 5591 11602 8000 8000 -2409 3602

2009 3451 10734 8000 8000 -4549 2734

2010 1785 7297 8000 8000 -6215 -703

(a) Capital expenditure estimated as an economic cost (equivalent to 96% of financial cost; SCF - .96).

(b) Based on foreign exchange component of capital expenditures, and which is estimated to be 80% of financial costs.

Figures give incremental foreign exchange outlays for the two hydro schemes relative to the thermal option.

(c) Based on repayment over 12 years following a 3 year grace period; rate of interest 10%.

(d) Savings I-) with BUI6IJf4 option.

Ie) Assumed fuel savings from FY2000 onwards.

A: Full thermal option.

B: Reduced Bumbuna scheme.

C: Full Bumbune scheme.

B-A: Reduced Bumbuna relative to thermal option

C-A: Full Bumbuna relative to thermal option

- 161-Annex 17Page 1 of 6

Table 1: NPA SUPPLY COSTS AND TARIFFS

Accelerated Growth Scenario

Reduced cugbuna Thermal optionFuel prIce alt. I Fuel price ait. 2 Fuel price alt.1 Fuel price alt.2

Discount Rate: 12% Units Capital OM Capital OM Capital 08M Capital O&M

Capital cost, 1986-2020 MUS S 117.40 117.40 117.40 117.40 79.00 79.00 79.00 79.00Rehabilitation cost MUS * 4.47 4.47 4.47 4.47 4.47 4.47 4.47 4.47

Total cost MUS S 121.87 121.87 121.87 121.87 83.47 83.47 83,47 83.47

Fael costs 1986-2020:Wet season MUS S 14.40 10.60 41.70 32.50dry season MUS S 19.70 14.90 29.40 22.90Total MUS S 34.10 25.50 71.10 55.40

Fuel savings MUS S 37.00 29.90 0.00 0.00

Net capital cost MUS S 84.87 91.97 83.47 83.47

Not present value of

increnental demands MW 33.22 33.22 33.22 33.22 33.22 33.22 33.22 33.22

Cost per kW USS/kW 2554.79 3668.57 2768.51 3668.57 2512.64 2512.64 2512.64 2512.64

Life period r 40.00 40.00 20.00 20.00Relevant annuity S/kW/y 309.90 335.83 336.39 336.39

O&M cost S/kM/Y 3.0% 110.06 3.0% 110.06 5.0% 125.63 5.0% 125.63

LF4C S/kW/Y 419.96 445.89 462.02 462.02

LRMC x 1.5 629.94 668.83 693.03 693.03

Assumed Load factor 67.0% 67.0% 67.0% 67.0%

Cost per kWh USt/kWh 10.73 11.40 11.81 11.81

- 162 -

Annex 17Pale 2 of 6

Table 2: NPA SUPPLY COSTS AND TARIFFSBase Case Scenario

Reduced Buubuna Thermal optionFuel price alt. 1 Fuel price alt. 2 Fuel pric alt,l Fuel prico alt.2

Discount Rate: 12% Units Capital OUM Capital OIM Capital O&M4 Capital O&0

Capital cost, 1986-2020 MUS S 44.70 44.70 44.70 44.70 31.50 31.50 31.50 31.50Rehabilitation cost MUS S 4.47 4,47 4.47 4.47 4,47 4.47 4.4' 4.47

Total cost MUS S 49.17 49.17 49.17 49.17 35.97 35.97 35.97 35.97

Fuel costs 1986-2020:

Wet season MUS S 7.50 6.10 21.30 18,30Dry season MUS S 12.00 9.90 16.10 13.80

Total MUS S 19.50 16.00 37.40) 32.10

Fuel savings MUSS 17.90 16,10 0.00 0.00

Net capital costq MUS S 31.27 33.07 35.97 35.97

Net present value ofincremental demands MW 8.67 8.67 8.67 8.67 8.67 8.S7 8.67

Cost per kW USS/kW 3606.69 5671,28 3814.30 5671,28 4148.79 4148.79 4148,79 4148.79

Life period y 40,00 40.00 20.00 20.00Relevant anrijity 5/kW/Y 437.50 462,69 555.43 55S.43

O&N cost S/kW/Y 3.0% 170.14 3.0% 170.14 5.0% 207.44 5.0% 207.44

LRMC 5/kW/Y 607.64 632,83 762.87 752.87

LRMC x 1.5 $/kW/Y 911.46 949.24 1144.31 1144.31

Assumed Load factor 67.0% 67.0% 67.0% 67.0%

Cost per kWh US¢/kWh 15.53 16.17 19.50 19.50

- 163 -Amex 17Page 3 of 6

7.461 3 9I9Wt.7 C05TS MS 6101993

66 t4 9e ~IrSI. 494I

nits 166 1967 1os i69 19 I91 In2 7993 low Io9 1996 Ir 94 I9" no

bod on* *,l *P e oras! US$I 20.00 20.60 10,11 16,00 17.60 16.10 20.10 21.93 72.90 24.90 2n.00 29.00 2.00 29.01) 29.00

r0,o uss/t 119.00 122.40 11o.90 I06.90 101.30 112.60 119.60 o 72.20 139.00 1,1.0, 146.00 441.00 144.00 146.00 146.00

4.3.D.00 001/T 219.06 219.47 206.97 195.60 '99.40 19"4? 211.99 223i. 236.06 290.06 294.96 ?24.96 294.04 294.06 253.52

Sim rw* Oleul ro 0.23S US/k9 2.0 S0 2.04 2.71 2.59 2.,0 2.69 2.62 ?.99 3117 3,07 .43 3.43 S.43 3.43 3.43410 0.00 USe/3h 0.11 0.11 0.10 0.10 0.09 0.to 0.11 0.11 0.12 0.13 0.13 0.1 0.1I 0.13 0.13046 454/k6 1.10 1.13 1.10 1.10 1.10 t1l0 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10

t*otal OokUT 4.00 6.09 3.92 5.7s S.69 %9.6 4.02 6.20 *.,S A." 4.46 4.66 4.61 6.46 A.4

WOO 96.66 Oleul: F0 0.000 &khii: 0.00 0.00 0.00 0.0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.004100 0.290 USCA 6.24 0. 96 e.91 3.61 9.48 9.79 6.1' 6.49 6.9$9 7.29 7.36 7. 7137 7.37 7..3046 O4 C/466 0.90 o.40 o.90 0.go 0.70 0.90 0.40 0.40 o.90 0." 0 0.90 0.S0 0..40 0.90 O."

*e.l Use/km 3.14 7.26 6.69 6.91 6.96 6.69 7.03 7.39 7.79 6.19 I .26 6.2 6.27 6.27 6.29

d. Ywibl1: P0 0.000 Usc/kWh 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.20 0.00 0,00 0.00WS'00 0M2P7 USd7k. S.10 9.20 4.90 4,99 4.47 4.73 *.01 9.30 94" 9,I9 6.09 6.03 6.02 6,02 6.01G04 USC/.46 0.43 0.43 0.43 0.43 0.43 0.43 0.4 0.43 0.45 0.43 0.43 0.43 O.43 0.43 0.49

Totl U%C 1kWh S.93 9.63 9.33 S /02 4.90 9.6 S.44 9.79 4.02 6.36 6.16 6.46 6.49 6.43 6.44

POO~ f rttt

60 to 1977! 0 SS0 * 101 .40 7A1h0 4.32 4.40 .. 27 4,02 0.96 4,13 4.92 4.12 4.79 4.99 9.02 3.02*.7 w 1911 1001 of Usc/1.. 6.49 6.49 6.44se CBS0 ht 2t009: IN 50 * 701 N90 LSe/k49 4.32 4.40 4.21 7 4.32 .96 4,13 *.32 4.92 4473 4.9 .*.02 S.07 1.02 9.02 3.02

Off p"oh 9s ION 10SSO USC/6 4.00 4.09 3.02 S,79 9.69 9.6 4. C2 4.20 A.3I 4.39 4.66 4.46 4.66 4.66 4.66 WV

ot .al 4lrk (190/90) A.G. USc/6w6 4.16 4.25 4,07 3.46 3.63 5,w 4.77 4.*6 4,ff 4.17 4.64 4.64 9.9 3 5.55 9. 99 II m1t

bewa 99'Wrk (S90/90) S.C. us9/k4l 4.16 4.25 4.07 .1 111 9 .63 S. 4.71 4.96 4.96 4.77 4.66 4.64 4.64 4.64 4.64

S"rl 8 .4 S 1I006 .60 LO/OUIl USrCk/66 7.14 '. 4.64 6.97 6.3 0.60 7.03 7.39 7,79 9.,I 4.24 6.29 6.27 6.27 6.29 43.02

64107eW416 r Wo

66W S, oad d GNP, 120.0 144.0 177.5 167.3 717.8 79.,7 220.9 249.4 290.4 317.5 342.5 373.6 407.8 444.6

"lo97?t .65669 (797 7.00 7.20 '.97 7,34 17.2 1766 7 .' 2.07 2.34 2.4,0 2.45 3.73 9.40 3.77 10.61

sea cam*W .w o 6.* I 12,.0 '32.0 141.2 747.4 144.4 749.7 954.9 174.6 M.4 1776.7 766.9 799.9 209.2 220.9

t0194r 4W86 am 779917 7.00 7.70 1.18 1, 7 1,20 1.24 17.29 7.3 1,74 7.47 I ,6 7.64 1.,4 1.64 7.92

1m1e45 thotow 1.00 1.00 :.00 7,00 7.20 '.00 7.00 7.00 1.00 7.00 7.00 7.00 7.On 7.00 1.92

6A699 w.9r4 r.96 Pk. 016 4.40 S.06 9.26 59.2 6.26 7.17 6.30 4.s0 11.S6 13.07 14.)) 20.19 21.92 73.9s 31.93

o0f 464 ~I5f6 4.09 4.70 4.92 S9I. 9.63 6.66 7.771 ,11 70.73 12.71 79.30 74.6s 7I9.s 17.26 45.10(90/507 MlM7' 4.29 4.46 S.10 3.33 6. S 6.91 6.0t 9.49 A 77.$ 72.60 73.69 17.7" 76.64 20.S6 4. 32

b.0 Cav 46.6 _alo, 4.40 4.64 4.79 4.67 4.97 9.37 4,63 S.SS 6.47 7.39 7.42 0.24 6.79 9.24 39.81Ott iWX996 O" 7I4 4.09 .)31 4.41 4.35 4.63 9.00 5.42 9.91 6.46 6. 46 7.29 7.94 9.72 6.19 3'.42(790/90) _'4h 4.29 4,47 4.97 4,51 4.80 9.70 9.63 6.74 6.77 7.79 7.34 7. 4 S." S." 12.61

.4,e,wta 44.wt% 11,1.,.9

Of 46.6 4.29

I50/1107 4.S6

lbut 010.6e 4.90of 46ol 4.76

79O/0/ 4.34

1S710109 StibeS '.27

- 164 - 6. * * 97

7o6l6 4: OA b TY 00TS as tAM9OUS

ia.i. I_966e 9967 gsa gsa 999 999 992 9993s 999 9993 9996 999 996 m seas

FA olStl/f 3.10 42.40 90.00 4 " 69.10 72. 70 99.90 U." 109.90 1192.0 994.70 1 9 I 9 9t6. 120.40O 92.40

H.S.3.0 uss/t I2I%" 1197.26 IC9."9 96.01 99,93 932.60 14.93 949. is 971.64, 96.79 201.11 mi.s0 1se 7.93 210.A1 294.02

Sim It4" o090: ro 0.13o Me/k I."4 1.47 I." 1.92 9.S3 1.99 9.99 2.93 2.311 2. 9 2.70 2.74 2.76 2. 63 2.6

WM00 0.009 0 U9/k6w 0.06 0.0 0.09 0.0 a 0.0 0.07 0.07 0.00 0.09 0.10 0.10 0.l0 0.10 0.99 0.99

066 U0/tt 9.190 9.9 0 9.90 9.90 j,J0 ILj 1.10 I.90 9.90 t,10 t,1 0 1.10 t 9.,0

*0t.l VW/lU% 2.90 2.93 2.94 2.4 1 2.60 2.67 S.60 3.31 .97 S." S.0 S.9" S.9 4.03 9.46

HI'P b%" 0.olu ro 0.000 9to o/9 0.00 0.o0 0.0o L..0 0.00 0.00 0.3 0.00 0.00 3.0o 0.o0 0.00 0.00 0.00 0.00Wm 0.2,10 409190 3.3 5.40 S.n2 1.41 3.s4 1.61 4.21 4.*7 sl.t S." 3.63 3.9) 9.03 9.10 4.21

04 Uk/S O." 0." 0." 0. 90 0.C0 o." 0." O."0 O . o.90 o." 0 .90 0A.0 0,90 0.3L

Total St/ho 4.44 4.3l 4.12 4.33 A." 4,73 r .93 S 1 7 9.00 G." 6.73 9.63 9.93 7.00 7.99

60.1 *womm PO Uk/M .0.00 0 0 .00 0 .00 0 .00 0.0 OO 0.60 6.00 0.0o 0. 0.60 0.00 0.00 0.00 0.00

"00 0.237 Uk/k* 2.93 2.79 2.93 2.92 2.62 3.93 3.40 S.6 4.24 4.791 4.n7 A. 4.93 4*9" .07

044 Uk/aO 0.43 0.43 0.43 0.45 0.4) 0J 4 0.43 0.43 0.A3 04 O3 .43 0.45 0.49 0.43 r043

Total UStUhO 3.J.5 3.I 9 .f S. 30 S.23 I.9S 3.tl 4.23 4.57 1.94 3.20 .26 3.36 3.42 *.90

AccSe94r.9 rgth

4 to 1977! M1 MSO * 90 1W0 Uk/lh 2.n 2.79 2.70 2.64 2.66 3.00 3.29 3.3s 3.62 4.I3 4.91 4.23*9t6 loll: 90090 k/O 036 3.42 S."0

* to 2003 t 50 150 * 909 Ka Uk/egt 2.0t 2.9 2.70 2.16 2.t0 3.00 1.26 3.33 S.62 4.93 4.96 4.23 4.9 is 3CS 4.39

Off *99m 1004 15O LSO/h. 2.7? 2.43 2.S4 2.61 2.69 2.87 0.0 3.391 3.57 3.63 3.) 34 3S." 4.03 4.09 N"

SOwat "3to8 IC0/30S A.G. UkJ/hO 2.7 2.71 2.62 2. 7 2.77 2.97 3.96 3.42 3.49 3.99 4.*04 4.t a 4.91 47 4.99 olmcor - t

111' ftftwh 93M010 SIXC.; Uk/ir 2.79 2.79 2.92 2.n7 2.77 2.97 S.39 3.42 3.oo S.99 4.04 4.00 4.94 A.96 4.2

well amra 1'0 960 Uk/hg. 4.44 4.30 4.92 4.135 4.3 4.73 3193 5.517 4. 09 4.14 9.73 4.08 9. 7.00 7.9 30.91

hamlers"l gltl _ rgr 4_4 MS 920.0 944.0 931.5 967.5 999. 99.7 220.3 249,9 290.4 392.3 342.3 37S.9 407.6 444.9

r9pt .a s . 9 (1979 9.00 1.20 9.09 9.31 9.31 1.49 19.4 2,07 2.34 2.90 2.93 3.93 3.40 3. 7 0.69

s94 Cos ~ft _a, am 920.0 932.0 949,2 941.4 964.4 949.9 934.A9 96.9 i9.1 976.7 999,1 996.9 209.2 220.9

99

p,t wbs go 199979 9.00 9. lO 9,9 9.9I 1.20 9.24 2 .2 1.91 1.49 9.47 .9. 9.64 1.74 9.64 7.32

I wist9 astt 9.00 9.00 9,00 t 100 1.00 9.40 9.00 900 19.00 9. 19.00 9.60 9.00 1.00 3.92

0.090 oq 909. 49w9r4*t099,*9

AIma tl90et4 gath 09 t 2. I 3.24 S. is S.9 4.64 14 4 6.4s 7.972 1.3 90.11 92.07 98.77 99.49 20.19 40.92099 909 _piot 2.3 L .0 3.S9 S. n7 4. S S. 10 6.07 7.39 9.00 0.93 99,23 12. 416 t91.79 93.3 3 .190/0) owl Oh' 2.71 S.94 0.42 3.87 4.30 3 .2 6.26 7.4s 9.33 90.32 19.94 194.93 99.09 1.7 37.73

343 Can 0949 MS909t 2.79 2.97 3.34 3.3M 1.49 4.06 4." 3.94 3.62 9.93 6.391 7.03 7." 3 . 113.14Off 0960 f.9t., 2.93 2.00 3.9s 3.97 .4" S3, 427 4.1110 3.42 3.74 9.194 9.4 7.03 7.32 24.10

(10/909 UkIpt 2.79 2.60 3.25 S.27 3.37 .." 4.42 4.97 3.42 S." 9.31 6.9 7.29 7.60 24.92

.we, 17"W"Ve!UkA/h

6f04wtvigd ro76IN POO 3.76

09 P.e 3,39

(90/901 . id

_4e 79.4 09o 3.42of P" s. 20

I90/19) S. 3 I

9seltf, pshmm 3.22

09 Z do A49C07 7,19 P9II96, A9.0. IS.

- 165 -

Annex 17Page 5 of 6

Table 5: PA LONG RUN SUPPLY COSTS

Exchange Rate Assumed: Accelerated Growth Bass Case48 Le/S Base fuel prices Alt. fuel prices Base fuel prices Aft, fuel prices

Incremental Energy Costs (from pages 3 and 4, Annex 17

Peak time USc/kWh 4.86 3.78 4.50 3.42

Off peak time USc/kWh 4.25 3.34 4.18 3.20

Marginal energy cost:General network (50/50): USc/kWh 4.56 3.56 4.34 3.31

Small centers (100% HSO) USc/kWh 7.27 5.22 7.27 5.22

Basic fuel prices Alt. fuel prices Basic fuel prices Alt. fuel pricesmV LV MY LV MV Lv MV LV

Marginal loss ratio to:

General network: 1.10 1.15 1.10 1.15 1.15 1.20 1.15 1.20Isolated systems: 1.08 1.15 1.08 1.15 1.08 1.20 1.08 1.20

Averdge Long Term Marginal Energy Cost:General network Le/kWh 2.4 2.5 1.9 2.0 2.3 2.4 1.8 1.9Isolat d system Le/kWh 3.8 4.0 2.7 2.9 3.8 4.2 2.7 3.0

Marginal Capacity Cost (from pages I and 2, Annex 17)

Reduced Gumbuna, USc/kWh 10.73 11.40 15.53 16.17General network Le/kWh 5.7 5.9 6.0 6.3 8.6 9.0 8.9 9.3

(W)Isolated systews Le/kWh 6.6 7.0 5.6 6.0 13.1 14.6 9.8 10.9

Average Incremental Cost MV LV MV LV MV LV MV LV

General network Le/kWh 8.1 8.4 7.9 8.3 10.9 11.4 10.7 6.72Isolated system Le/kWh 10.4 11.0 8.3 8.9 16.9 18.8 13.9 7.84

(a) Estimation of LRMC for Isolated Systems:Capital cost: 5800.00 PMT 5141.59 S141.59 S141.59 5141.59OIM: 10.0% S 80.00 S 80.00 S 80.u0 S 80.00

Total: Load fact 0.30 S221.59 0.35 5221.59 Lf 0,15 S221.59 0.2 5221.59Nb. H/Y 2628 3066 Nb.H/Y1314 1752

USc/kWh 12.65 USc/kWh 10.84 USc/kWh 25.30 USc/kWh 18.97

- 166 -

Annex 17Page 6 of 6

NPA Operating Budget and Tariff Requirements

ASSUMPTIONS: Generation 130 Gwh

Sales 100 Gwh

Exchange rate Le .25 = US$1

The information is presented in US dollars as most costs areincurred in foreign exchange; labor costs are converted to US dollars atthe above rate.

US$ million

Spare parts/materials 3Fuel:

Lubricating oil 1Diesel 0.25Fuel oil (US$13-15/barrel) 3.25-4

Labor/Administration 0.75

Provincial losses(Fuel and spare parts) 1.5

Debt Service (foreign loans)Interest 0.75principal 1 1.75

Cash operating requirements 11.5 -12.25

Add Depreciation (5% of $120million replacement cost 6) 5

less principal repayment - 1

16.5 - 17r25

Add Return on capital8% on $40 million 3.2

net fixed assets 19.7 - 20.45

Dividing total costs into sales of 100 GWh gives acost of US19.7 -20.45C.


HOUSEHOLD ENERGY SURVEY RESULTS

Mission Household Energy Survey

Table 1 summarizes the results obtained from the limited house-hold energy survey conducted in Freetown during the mission.

rable 1: RESULT OF MISSION HOUSEHOLD ENERGY SURVEY

Average SampleHousehold Samplesize Fuelwood Charcoal Kerosene Electricity Size

(kg/cap/yr) (kg/cac/yr) (Itrs/cap/yr) (Le/month)

Sample Average:Average/user (A) 7.,3 549.80 33.60 25.59 21.98 # SamplePercent users (B) 63% 61% 88% 74% 127Average/sdmple (C) 347,92 20.47 22.59 16.32

Income I Le/month: 0-300A Sample

Average/user 6.33 666.54 33.51 20,72 21.91 24Percent users 79% 54% 96% 67%Average/sample 529.26 18.15 19,86 14.60

Income 2 Le/month: 3'1-500. Sample

Average/user 7.16 413.52 30.48 26.27 18.29 58Percent user 69% 60% 91% 72%Average/sample 285.19 18.40 24.00 13.25

Income 3 Le/month: 501-800J Sample

Average/user 7.52 768.49 32.52 26.38 23.57 33Percent users 58% 61% 85% 79%Average/sample 442.47 19.71 22.38 19.57

Income 4 Le/month: 801+tSample

Average/user 8.00 229.63 46.74 31,20 32.43 12Percent user 25% 83% 57% 921Average/samp 57,41 38.95 20.80 29.73

Notes: (A) Average fuel consumption/actual user (i.e., average fuel consumption by actualusers of the fuel in the sample, excluding those who do not use it).

(B) Percent of total sample of 127 households who use a particular fuel.(C) Average fuel consumption/lotal sample.

Source: Household survey conducted by mission members.


It is clear that, as incomes increase, there is a shift awayfrom firewood toward charcoal, kerosene, and eLectricity, with thepuzzling exception of the third income category (Le/month 501-800), uhichhas high per capita fuelwood consumption as well as increased use ofcharcoal and commercial fuels. A variety of explanations are possible:increased ouantities used in festivals or social gatherings, lessefficient end-use conversion, etc., all functions of greater wealth.More surveying is needed to expLain this phenomenon.

Reliability of energy expnditure estimates: The reliabilityof the survey estimates is difficult to ascertain. There were a numberof shortcomings in survey design and implementation. Firstly, the sizeof the sampl.e was not determined on any statistical basis. Rather, thenumber of households interviewed, 128, was the maximum feasible withinthe limited time available for this effort during the mission. Secondly,the stratification of the sample by income class - so that the samplewould be representative of Freetown in terms of income distribution - wasbased on the views of government officials and local researchers; incomedistribution data which could have been used as a basis for stratifyingthe sampLe was not available. Finally, reported incomes could have beenseriously understated thereby raising the share of energy expendituresabove its true level. While it is not possible to evaluate the netimpact of the above shortcomings on the estimates, it is worth notingthat the percentage shares given in Table 4.1 are about the same as thosereported by two unpublished studies carried out in the recent past at theUniversity of Sierra Le- These estimates are also not exceptional byAfrican standards; recer.- surveys carried out by the Bank elsewhere inAfrica, most notably Ethiopia, have revealed even hligher shares allocatedto energy purchases.

- 169

Annex 19

RETAIL PRICE MOVEMENTS IN HOIJSEHOLD FUELS(Freetown, 1983-1985)

CPIYear Fuelwood Kerosene (1978 = 1.0) Fuelwood Kerosene

(Le7ie) (Le/pint) (1978 Leones) (1978 Leones)

1979 0.01 3.13 1.0 0.01 0.131980 0.01 0.19 1.11 0.009 0.171981 0.02 0.21 1.29 0.016 0.1631982 0.02 0.31 1.79 0.011 0.1731983 0.04 0.47 3.05 0.013 0.1541984 0.10 0.40 5.07 0.020 0.0791985 (e) 0.25 0.81 7.9 0.032 0.10

Total increase: 1983-85 +146% -35%1984-85 +27%

(a) Mission estimates.

Sourc-<: Central Statistical Office, Annual Statistical Digest, 1984.

- 170 -

Annex 20

CURRENT COST/FRICE BUILD-UP FOR FIIELWOOO RE AILED iN TWO DIF-EPENT AREASOF FREETOWN, FEBRUARY 1986

(in Leones)

Central District East DistrictPacks or Packs or

"Whole Bundle" "Splitted Bundle" "Whole Bundle" "Splitted Bundle

Le/Bundle Le/Split Bundle Le/Bundle Le/SpK;t BundleWHOLESALE/TRANSPORT COST STRUCTURE: d/ approx 0.4

Purchase rice e/ 0,4 0.4Transport Cost 0.67 0.13

Mdrgin 0.13

Total 1.2 1.0

RETAILER'S COST STRUCTURE:

i) Purchase price from lorries 1.2 .50 a/ 1.0 .32

ii) Splitting costs -- .08 -- .05iii) Implicit capital charges 0.01 0.02-.03° 0.1 0.02

iv) Dealer's margin b/ .29 .20 .44 .11

TOTAL RETAIL PRICE/bundle 1,50 0.80 1.45 0.50

IMPLIED RErAIL PRICE/kg c/ 0.28 0.35 0.26 0.28

Notes: a/ Survey suggests each bundle yields 2.36 splitted bundles or packsb/ Calculated as a residual figure.c/ Based on sample bundle weights at each location, for both splitted and whole bundles.d/ Assumes fuelwood purchased outside the Western Region where producer prices are almost

constant.e/ Based on a five-person crew, 200 trips per year of 100 miles one-way, and transport routes

adjusted from those estimated for gasol;ne trucks. In this case, using very old trucksw th little capital value (actual case) results in 0.75 Le/Ton-mile (4.7 US cents/TorN-Kmat 10 Le51), as-uming a 7 ton truck. Truck may carry only about 1100 bundles and costper 1100 bundle trip is 525 Le, or 0,d7 Le/bundle. Fewer trips annually or use ofvehicles with higher value will reduce margins. Carrying a larger number ofbundles/truckload would increase margins. For the backhaul transporter transport costswill be less.

Source: Mission estimates

- 171 -

Annex 21

ENERGY POTENTIAL FROM ANNUAL AVAILABLE AGRICULTURAL RESIDUES IN SIERRA LEONE

Total Waste Calorific Total

Annually value energy Total

Produced potential Energy

(tons) (GJ/tonne) (GJ) (toe)

Rice husk 180,700 12.75 2303,925 53,362

Rice straw 21010,680 13.5 28372,680 644,833

Cocoa husk 8,600 14,2 122,120 2,775

Coffee husk 30,500 15.35 468,175 10,640

Peanut shells 10,100 15,46 156,146 3,548

Pale kernel shells 75,850 1.4 1243,940 28,271

Pale fru,t fibers 47,530 23.2 1102,696 25,061

Woody Remains of pale fruit bunches 72,520 18,2 13-9,864 29,996

Bagasse 20,200 9.4 188,000 4,272

A. Total Crop Waste 35277,252 801,758

Cowdung 420,000 14.5 6090,000 138,409

Poultry 85,817 4.4 377,594 8,581

Piggery 9,900 1,8 1/,820 405

B. fotal Animal Weste 515,717 6485,414 147,395

Grand Total (A+B) 41762,666 949,153

Source: Dr, J. C, M. Massaquoi, "Biomass Resource Assessment: A Survey of Sierra Leone'w

Enegy Potential Agricultural and Forestry Wastes., London: Commonweal'h Science

Council, 1985.

- 172 -

Annex 22

LIGNITE DEPOSITS IN SIERRA LEONE-YEMA AREA

Characteristics of Lignite Deposits in the Yer Area

Previous Analysis a/ Mission Analysis

Sun-dried Sample Not

Sample Sun-dried Air Dried Dry-Basis

Water 15.4% 35.3% 12,6%

Volatile matter 42,8% 34.01% 45.'%

Carbon 35.8% 26.83% 34.8%

Ash 6.0% 3.86% 7.6% 8.7%

Calorifi- Value 8014 BTU/lb. 7254 BTU/lb,

Lower 7743 BTU/lb. 9003 BTU/lb,

Higher 8240 BTU/Ilb, 9424 BTU/lib,

Ash Cortent of Lignite Deposit

SiO2 - 50.35%

Fe203 - 35.41%

Al203 - 8.54%CaO - 1.01%

MgO - 0.05%

a/ Sample anaiysis reported to have been done prior to 1580,

9AP SECTION

___________________________________ _____ !~~~~~~~~~~~~~';IRD 20078

EXISTING PRIMAR I ANDUcCONDARY ROADS:

SIERRA LEONE Unps%ed

- Foeder roads

Kitometa n s 20 40 , 80 80 RailwaeysKltorna~~~~~~~~~~~~~ers 20 ~~~~~~~~~~~~ ~International airport

miles0 10 20 30 l0 5 + Airstrips

Rivers

Provinco boundarios

G U I N E A .F 0-- -- International boundaries

O / - N JRN E A

2 PROVINCEE A , . ' ~~~~N O R T ER N

WE,TE ~ ~ ~ ~ ~ ~ ~ EATRN

AREA P R O V I NCEA

SOU T E T A R N P A RO 1 V I CE

- BERiA'RAt A . \'A>AvINe .A,bs. * ^ ...

S. T, PE aN Iifl . ,, ,, 'S. ' :/

DECEMB1R 1986

MA URi?ANANi AMALIX g^,, z SIEhRA LEONE

-s t t - t-r tNIGER rorst-,W.0fft POWER SYSTEM AND POTENTIAL.URt KINA. -.->' -A,.r HYDROELECTRIC SITES

- - -. ~~~~~~F ASO ~I~8oGUINEA ' -; 0Wl0' t*.0 Potential hydroslict:ric Site$

S \,",^r I ".TE 0001 | f Y^i-D 'DXF MW Potenti al maximum InstalledSIESA - C' / NIEIATE *p0. capcit in megawatts

LI (DvOIRE ¢hA " ,NIGERI b rO S e DA NPA diesel genetating plants

tl8*11iA & ,p ) .,,ern<t w t. D *A1:@ .a i^i Mines with private thermalTOGO lENIN W0 power plants

Aff/' - e * Hydroelectric plantsExisting transmission lines

__ - _ - Projected transmission lines

131- KUSE

13- 911MW KAMBATIMBO Falab KJ1 *36 IMW N

/

TENDATAso 4M W

/ ~~~~~~~~IAAKABA,A|213 MW A G U A N E A

outc of possible __ 25 OMWAtransmission BANDA-KARAIA

interconnectian 28Mwwith Guinea

A BPeMeruBUNA'. ~K ~ AMBiA \/

Rakpur MANGE00 0 O \90MW wornj

Mafflicolo\ ,U rE r

PCJ; * ECKOA X / \ BETMAI O L\. / <,~~MA';BAiz4$

.vngi, ROKON @+Molormt'; BENKONGOR i tLA0 ROKON 9 0MW/ 38 9MW&& 0 .".-J

66 9MW BENKONGOR 11 Yengemt 5Q -_ -A

Qppe' 5 250 6MIA Ko .1u

EETOWN * /

zEX ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~BENKONGORIII K_ n dtr-/ ~~0

'._ Ha1Osr rrgs / 0

0bo-i O lee e 262MW N 7

J °A NYANDEHUN;12 MW, I

wVate, o % T!TAMA K'no lA iAHJN

DKent Barfc,o A NJrzo GOMA o

Sierornco U%rnc LEVUMA \,, I

Serbeh, Mokange A B_- \ A -

Sierqomco - MAMBOMAGonclarraA 0 33MW AA 0 KN AG J ngao d em QB n a * LAO MA K ENEtM AGbo 0oo 33 MW

Sierra GANDORHUN

& R u tIRutle 75 2MW BARAKAR itti 375WAl

(Sieromco- J o, 375MW , 0

h,~ ~ ~ ~ ~~O' Diesel~ 1 O0 JO'u

t-omc .i OMoIru, °Srrour,a O57-10- J I B E R I ASON' HE

AP -

-^<rnotb,rn A0 /MANO

, PflOJECT,- 180Mw

` 5) R RversKILOMETERS O 20 40 60 80 100 ® National capital

P _____________________________________________ _ (@) Province capitals

MILES 0 20 40 60 S.l:0moo T 'International noundaries

13- 12A

AUGUST I

S I L R R A L E O N E

GUINEAM8 * NATURAL FOREST REGIONS

SIERRA . ' ' '*: ,iLEONE /

BENIN

__ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ I M\t

g!~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ AP. xiX n Al

1 t1

f ~~ ~~~~~~~~~~~~~~~~~- NAA')NA, OI 9I'

U i N E A OKobeh

i iV fi °~~~~~~~~ ~ ~ ~ ~ Kamakok \

/> Oaba ,* ~g G U IN E A

f~~~~~~~~~

OKambia _0 _ GUbNEA

90 / f~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Lungs 0 3AraaoLmapb"r

FREETOWN 0 Y ,

linas i J ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~KIn&

- ^* 0' qW t<r90~~~ 1P $'OKato Mo~~~a,b. 0 Taama 0Yel

-~~~~~~~~~~~~~~~~~~To O Ta_ ;.

0.~~~~

OM - ' ' { a -n * * f . j

0~~~~~~~9

| a N - - ~ * / - \. _ - NA'ONA lI CAPT lA[

* PRO)VINC[ CAPITAI,S

G U -~--d - ~0 I I E i D -OWNS- - ONKoNA•JNlAci .OUNDAftS

. w > .. : ,%:¢/ ,-- ---

'9~-

/' Ot4Qmbio * 'fd_ f' ) 5 v) , f G U I N E A

* , - # Ph.r\: /~~,- '' -_

./ OKamb~~~~o . f GUINEAkwom

0 0 M.WMbi

9- M aange

Mombolo

lungiO > °0 Mhatzmp e

0Pepd

FREETOWN

8"~~~~~~~M O9ongum o -pr8

~~~~~OSdaumpo0abb0 -a> * 0 _,/

-ooei S Pm onejumo-"'- v~'-7

zituno ~ ~ ~ ~ ~ ~ ~ K&xu

-, °Tb^m , tgE :g L I B E R I A~~~~~~~Tm -

;~~~~~~~~~~~~~~~~~~' w-.---K. -I

rr 0 20 40 6tl 80 100 0 {H) - _ _- .f_

0 /t 20 ~ 40 6t) jf -- O _

cr ~~~~~~~MILES APslo -,,, ' -,,

.,. -3° ,76 S"°

13 12~~~~~~~~ ii. --~~badoun

0 20 40 60 so 100 0~~ ~~~~~~~~~~~~~~~~~1

Reports Already Issued

Togo June 1985 5221-TOVanuatu June 1985 5571-VATonga June 1985 5498-lONWestern Somoa June 1985 5497-WSOBurma June 1985 5416-BAThailand September 1985 5793-THSao Tome and Principe October 1985 5803-STPEcuador December 1985 5865-ECSomalia December 1985 5796-SOBkurkina January 1986 5730-BURZai r May 1986 5837-ZRSyria May 1986 5822-SYRChana November 1986 6234-GHCuinea November 1986 6137-CUr4adagasc.Ar January 19&7 5700-MlACMozambique January 1987 6128-MO%Swaziland February 1987 6262-SWHondiras August 1987 6476-HO

F rrt?A ; smr -t Stat ur Report

Pa NV IC; 1983laurJ I ; October, 1083

,irl. i.rttlka Janrary, 1984al.'. Jw"; 'ailuary, 1984

Bulrund i February, 1984EB ari* oIad .:, April, 1984K enya Mae- , 1984R.warl'a May, l9842. iLdu August, 1984Ugandla Augustr, 1984l 1(n'. o i .' a September, 1984Sene,gal OcLober, 1984Su(lda November, 1984Nepal. january, 1985Zamb ia August, 1985Peru Auguist, 1985Ha~i. X Auguist, 1985'a ri o uav Snpt ember, 1985

VI 1r%c 6 January, 19i6Niper Fpbhri.try, 1986

report no. 6597-sl sierra leone: issues and options in the...

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