Togo Electrification Strategy

Togo electrification strategy

Presentation | June 2018 Presentation

This is:

▪ a strategy document supporting the Government’s vision for universal access by 2030 through the deployment of grid and non-grid solutions

▪ a roadmap showing the main milestones for strategy implementation in the short, medium and long terms

This is not:

▪ A detailed technical study of the technological solutions to be implemented in each location

2 Table of contents

Government's vision for universal electrification

Current situation

A new approach to universal electrification

Roadmap

Annexes

3 Government’s vision for universal electrification

▪ Togo recognizes that access to electricity is essential to its policy of inclusive economic development and growth and is a key pillar in the success of its new National Development Plan ▪ Togo’s ambition is for universal access by all its citizens by 2030, with 100% access over the next ten years – This will be achieved by an intelligent combination of grid extension with non-grid technologies (mini-grids and solar kits) – The national strategy is based on a cheapest solution approach to the technologies to be deployed in the country ▪ Togo’s achievement of universal access will use private sector investment from mainly public/private partnerships (PPPs) and targeted support that will, for example, give the most vulnerable access to electricity

Togo’s approach aims to show that a country can be electrified in just twelve years

SOURCE: Workshop with the main stakeholders 4 Togo is currently at a critical point in its electrification process

Present xy % Electrification

2010-2016 2017 2018-2020 2021-2025 2026-2030

Business as usual Paradigm change Demonstration Acceleration Consolidation

▪ Grid based ▪ AT2ER formed ▪ New ▪ Mobilization of ▪ Continuing ▪ Public sector ▪ Introduction of electrification the additional deployment of management non-grid strategy financing the solution ▪ Review of the needed for electrification ▪ Private sector regulatory scaling strategy until involved in framework ▪ Multiplied calls universal electrification ▪ Introduction of for tender and access flagship project launches achieved programs ▪ Proof of regional leadership

2337% ~40% ~4050% 5075% 75100%

5 The Togo electrification strategy draws on numerous approaches NOT EXHAUSTIVE and sources of information

Approach Illustration Description ▪ Geospatial model used to determine the most economical Geospatial electrification model for each model location in Togo

▪ Various benchmarks and case Benchmarks Mini-grid studies underpinning the and case modeling and operating model studies Solar kits assumptions

Public ▪ Meetings with over 25 Togolese sector and international energy stakeholders to test the various Financial propositions within the strategy sector Meetings and identify additional sources of Energy finance firms Financial backers

6 Table of contents

Government's vision for universal electrification

Current situation

A new approach to universal electrification

Roadmap

Annexes

7 The Togo electrification rate rose from 23% in 2010 to ~40% in 2017, almost exclusively through grid extension SHS Mini-Grid Grid Electrification rates 2010-2017, %

+8% p.a. 36% ~40% 33% +6% p.a. 30% At the current rate 28% of electrification2, 26% 26% 23% universal access will not be achieved until ~2050, with less than 60% access by 2030

2010 11 12 13 14 15 16 20171

1 2017 launch of 4 solar mini-grids (600 kWc) and installation of 2280 kits solar kits in 25 villages 2 Assumption of 39k households electrified p.a. in 2018, and 5% annual growth in the number of electrified households SOURCE: Togo Local Electrification Program 8 Almost 1M households in Togo, mainly in rural areas, are still without electricity Togo electrification rate Millions of electrified households, 2016 Electrification rate by region, 2010-2016

Not electrified Electrified 0-10% 11-20% 21-40% >40%

6% 8% 11% 0.9 1.5 Savanes

20% Kara 13% 16%

0.8 1.0 12% 14% 18%

Centrale 0.6 0.1 0.1 9% 11% 14%

Plateaux 0.4 0.5 9% 13% 20%

92% Urban Rural Total 63% 74% Maritime 80% 7% 36%

Electrification rate Lomé 2010 13 2016

SOURCE: Togo Local Electrification Program, team analyses 9 Electrifying all households by 2030 would mean electrifying ~1.3M additional households, of which 0.9M in non-electrified areas Not electrified Electrified Number of households to be electrified Aspirations for universal (100%) Millions of households access to electrification

~0.6 ~2.1

0.4 ~1.3 million 2030 homes not 0.2 ~1.5 electrified in 2030, 1.3 or 113 000 2030 households 1.0 or ~7% of the population electrified every 2025 year (0.9 million in 0.7 non-electrified 0.5 areas2)

2017 Population 2030 growth1

1 Assumption: 1/3 of new households are in already electrified areas 2 Estimated 400k non-electrified households are in already electrified areas and need last-mile electrification SOURCE: CEET, INSEED data, press, team analysis 10 Electrifying 113 000 households p.a. to achieve universal access by 2030 may seem ambitious – but is realistic Togo requirement p.a. at 2030

Togo history History in other aspirational countries Connections p.a. (000 electrified households) % additional households connected p.a.

Togo must almost triple its historic annual connection average by also ~113 Vietnam using non-grid solutions 4.9% (99-08)

56 Kenya 51 5.3% 47 (12-15) 39 32 ~39 28 19 South Africa 3.1% (94-04)

2011 12 13 14 15 16 2017 ~7%

286 # electrified households (000)1 549

1 Electrified households are both households that are official grid subscribers and those that are not officially connected (~x1.5 subscribing households ). The estimated number of persons in each household is 5, in line with 2010 INSEED estimates SOURCE: INSEED, CEET, Kenya power, press, WEO, EIU Canback 11 Table of contents Government's vision for universal electrification

Current situation

A new approach to universal electrification

▪ Market segmentation

▪ Business model

▪ Financing the vision

Roadmap

Annexes 13 If it is to triple the number of households electrified each year, Togo must use the latest technologies and business models

Grid connection Mini-grids Domestic solar kits

▪ Connection to the national grid ▪ System powered by solar panels, ▪ System that uses solar power via managed by CEET diesel or hydro, able to supply a photovoltaic panels, can supply ▪ Cheapest option for densely number of households/SMEs an entire household or one SME populated areas near the grid ▪ Cheapest option for densely ▪ Cheapest option for areas not ▪ Traditional electrification model populated areas not near the grid densely populated and not near ▪ Might be connected to the national the grid grid in future ▪ Can be installed quickly and sized to fit the needs of the household concerned

Generally private sector with Generally public sector Requires a PPP public sector support

SOURCE: team analysis 14 To do this, we must rethink access to electricity in terms of service level for all technological solutions Level 1 Level 2 Level 3 Level 4 Level 5

Daily ▪ Min 12 Wh ▪ Min 200 Wh ▪ Min 1000 Wh ▪ Min 3400 Wh ▪ Min 8200 Wh consumption Installed ▪ Min 3 W ▪ Min 50 W ▪ Min 200 W ▪ Min 800 W ▪ Min 2000 W capacity Devices ▪ Lighting for ▪ General lighting ▪ Level 2 plus ▪ Level 3 plus ▪ Level 4 plus work ▪ Phone charger medium-power high-power very high- ▪ Phone charger ▪ TV devices (e.g. devices (e.g. power devices ▪ Fan, if food mixer) microwave) (e.g. fridge) necessary

Solar kits

Mini-grids Minimum level set by the Togo Government Grid

Togo has decided that an electrified household has access to: (i) modern lighting; (ii) a cellphone charger; and (iii) additional devices where this is possible and the household wants them. The installed capacity equivalent for this level of service is at least 20W

SOURCE: Beyond Connections: Energy Access Redefined (ESMAP, 2015) 15 Geospatial modeling using digital mapping of Togo has identified for each locality a preliminary mix of the most suitable technological solutions, based on existing and projected demand

Geospatial approach to the electrification strategy Main advantages ▪ Efficient – the method uses a cheapest solution approach for each locality, based on identified demand ▪ Dynamic – the model can cope with change, including change in technological solution prices to 2030 and population growth ▪ Transparent – the model uses objective criteria and accessible data ▪ Updatable – the model can be adjusted and updated in line with changes in the electrification program (e.g. grid extension)

Current Solar Light Localities Selected grid radiation emissions technologies

SOURCE: GIS model 16 ESTIMATES Result – To ensure universal electrification by 2030, almost 50% of the additional households could be connected using non-grid solutions Grid Last mile Mini-grids Solar kits extension grid1 Illustration of technology choices per locality (n=3248) Implications (for universal access by 2030) Total

21% ~270k Connections 1 % of new 31% ~400k households 4% ~55k electrified3 43% ~555k2

30% ~965 Localities % of new 0% N/A localities to be 10% ~315 electrified3 61% ~1970

44 Generation 64 Additional capacity (MW) 9 85

1 Last mile electrification through the grid of households currently without electricity but in localities connected to the grid 2 Includes households in ~11k small communities, excluding the 3248 localities identified 3 Does not total 100% because percentages have been rounded up/down SOURCE: geospatial model, team analyses 17 ESTIMATES The size of the country and low population density mean that grid extension and solar kits predominate in different regions x Electrified locations # new connections per technology Total electrified 2030 households1, 2030 69% 26% 4% ~120k Savanes ~225 ~40 ~745

62% 31% Kara 7% ~135k ~155 ~60 ~365

62% 31% 6% ~95k Centrale ~130 ~35 ~240 68% 22% 9% ~280k Plateaux ~210 ~150 ~455

41% 55% 4% ~255k Maritime Grid1 Mini-grids Solar kits ~240 ~30 ~170

1 Total excluding ~400k connections to be made in locations already on the grid SOURCE: geospatial model, team analyses 18 Togo’s winning combination

555,000 solar kits

mini solar grids 315+ 100% new localities 960+ connected to the grid electrification by 2030 households without 400,000 electricity but already on the grid

in additional power 108MW+ generated by the grid

19 Table of contents Government's vision for universal electrification

Current situation

A new approach to universal electrification

▪ Market segmentation

▪ Business model

▪ Financing the vision

Roadmap

Annexes 20 To achieve full electrification by 2030 we will need ~CFA 995 bn in investment, or 83 bn p.a. over 12 years

ESTIMATES Methodology Total cost over 20 years (CFA bn)

995 ▪ Costs at discounted value of the investments needed over a 20-year 435 life, including: – Initial investment (capex), including 413 147 investment for productive usage – Recurrent investment of which 55 bn (opex) generation2

– Grid connections: price Grid Mini-grids Domestic Total of electricity solar kits consumed (cost of Total supplementary connections generation) ~670k ~55k ~555k ~1,3M by 2030 Cost per connection, ~620 ~2640 ~780 ~750 CFA K1 1 Cost over 20 years (including relevant consumption), including productive usage of electricity 2 Conservative estimate of cost of energy consumed by households connected to the grid over 20 years: production cost + current transmission (including loss) SOURCE: geospatial model, team analyses 21 To achieve universal access by 2030, Togo will need an average of ~CFA 83 bn p.a. - 4 times the historic average

ESTIMATES Estimated cost of electrification 2010-20161 Annualized cost per technology (CFA bn) 2018-20302 (CFA bn p.a.)

To cover such a 83 large increase in investment new sources of finance 34 must be found, mainly by involving the x4 private sector 12 26 22 23 18 ~18 13 15 9

2011 12 13 14 15 16 2017 Total Grid Mini- Solar grids kits

1 Based on the annual number of connections p.a. (CEET) multiplied by the estimated total cost over 20 years, including generation, initial investment and recurrent investment in grid maintenance 2 Cost incudes mini-grid and solar kit operator margins; costs include electrification for productive usage e.g. telecoms towers, schools, La Poste

SOURCE: CEET, Local Electrification Plan, team analysis 22 The private sector has demonstrated its ability to take an active and effective part in electrification projects and non-grid solutions in particular. Togo should capitalize on these successful models

Implementing Togo’s electrification strategy and obtaining the necessary investment will require intervention from the private sector Current sector position Examples of stakeholders ▪ Various payment methods Using the private – Retail sale, like any consumer product sector as the key – Pay-as-you-go, payment spread over several player in the years deployment of ▪ Evolving systems that consumers can select as non-grid solutions required and in accordance with their ability to is now a tried, Solar kits pay tested and generally accepted ▪ Innovative solution for small revenue- decision generating businesses (e.g. dressmaking) ▪ Average life of a kit is 7 years (1 initial purchase + 2 renewals over 20 years)

▪ Mini-utility model suitable for a combination of households + SMEs within a location and able to be hooked up to the mini-grid system Mini- ▪ Particularly suitable for level 3 or higher grids ▪ Average operating life 20+ years

23 However, public support will be needed to encourage private investment in non-grid solutions. Three types of support could be considered

Form of public support

Technical assistance and Financial instruments for 1 2 3 Public investment indirect support private investment

▪ Technical assistance (e.g. market/ ▪ Credit lines at concessionary or ▪ Viability subsidies (e.g. for feasibility studies) preferential rates mini-grid investment, for the ▪ Indirect operating support (e.g. ▪ Concessional equity most vulnerable segments for logistical assistance with solar kits) solar kits), could be result- ▪ Guarantees against payment based (number of electrified ▪ Tax exemptions (VAT and Customs default households) duty) ▪ Regulatory framework (e.g. concession zones for mini-grids, ▪ Targeted subsidies for public standards, licenses, performance, services and national data, etc.) priorities (e.g. schools, medical centers, agricultural support programs etc.), could also be results-based

SOURCE: discussions with mini-grid and solar kit operators, team analyses 24 Togo Mini-Grid Program

Mini-grids by 2030, 150+ of 300+ which high probability

55 000+ Electrified households

25 MINI-GRIDS Mini-grids: Togo aims to deploy over 300 mini-grids by 2030

Total electrified 10k 20k 25k 55k households Deployment targets Locations to be ~60 ~120 ~135 ~315 electrified

2018-2020 2021-2025 2026-2030 Total

Installed ▪ Around 9 MW solar generation capacity installed capacity

Financing Business model

Total requirement: ▪ Deployment mainly driven by public/private partnerships CFA 147 bn – Private sector has the equipment, is responsible for most operations along the value chain (e.g. construction, 40 maintenance) Private 79 – Public sector helps fill the viability gap with technical Public assistance and indirect support (e.g. fiscal), and results- TA & IS1 28 based subsidies

1 Technical assistance & indirect support SOURCE: team analyses 26 MINI-GRIDS Within a mini-grid PPP, support mechanisms would keep public investment down at around CFA 1.8 K per month per connection details next page pre-development support tax incentives Reduction in mini-grid electricity costs per connection1, (CFA 000 per month)

9.3 2.5 0.4 2.1 6.8 5.5 Needs will decline over time as technology costs drop

0.5 1.8

Total cost Favorable AIPU (Average ARPU (Average Financial instruments Public investment environment Investment Per User) Revenue Per User)

1 Technical assistance and indirect support Consumer contribution 2 Financial 3 Public investment ▪ Tax incentives (e.g. exemption from 18% VAT on ▪ Average of ability to pay CFA instruments ▪ Subsidies covering equipment or from Customs duty on batteries/ 3.9K per month (residential) ▪ Reduced construction costs (up to inverters)2 and 5.1K (with productive finance 40%), based on best 2 ▪ Technical assistance and pre-development usage) expense (e.g. practice in other (responsibility for pre-development) ▪ CFA 8K for productive usage concessional countries (TBC through additional loans or credit ▪ Subsidies could be ▪ Identification of best location areas (e.g. details lines2) of grid arrival) analyses), with 70/30 results-based residential/productive ratio ▪ Standardization of licensing procedures

No direct financing required Financing by the user Public financing/cross-subsidies/TFP

1 Required revenue based on $5000 average connection cost spread over 20 years and 400 kWh monthly consumption p.a. Opex is 3% of CAPEX p.a. 2 Assumes 8% commercial loan is replaced by a 2.5% concessional loan (debt/equity ratio is 40/60) SOURCE: Common external tariff of the West African Economic and Monetary Union (WAEMU, 2017), team analysis 27 MINI-GRIDS The total finance requirement for the deployment of mini-grids in Togo is ~CFA 147 bn

Technical assistance and direct support requirements (CFA bn) Description

▪ Exemption from VAT and Customs duty on mini-grid Tax incentives 25 components (e.g. inverters, batteries, plus photovoltaic panels – which are already exempt)

▪ Technical assistance to finance: Technical assistance – a national study on consumers’ readiness to pay and other indirect 4 – detailed pre-feasibility studies on mini-grid sites support and their prioritization (including individual data sheets and interactive databases for the use of the private sector) – Review of the regulatory framework Credit lines 79

▪ Credit lines provided for mini-grid operators for concessional-rate loans

Subsidies 40 ▪ Results-based financial subsidies (e.g. number of installed connections)

Total 147

SOURCE: discussions with mini-grid developers, Doing Business, team analysis 28 MINI-GRIDS Mini-grids: strategic roadmap and finance requirements

2018-2020 2021-2025 2026-2030 Demonstration Acceleration Consolidation

▪ Review regulatory framework ▪ Continue and accelerate calls for ▪ Continue and accelerate calls for ▪ Launch PPP flagship projects tender based on learnings from the mini- tender Aims ▪ Improve AT2ER capacity grid pilot auction ▪ Review and adjust program

▪ Mini-grid pilot auction demonstration ▪ ~120 additional mini-grids ▪ ~135 additional mini-grids Results ▪ ~60 operating mini-grids ▪ ~20 000 additional households ▪ ~25 000 additional households ▪ ~10 000 households connected connected connected ▪ Support in the review of the ▪ Continuation of the mini-grid auction ▪ Review and adjustment of the mini- regulatory framework (standards, program and its calls for tender grid auction program pricing, concession agreements, grid ▪ Support for AT2ER and ARSE in the ▪ Continuation of calls for tender connection, VAT and Customs, etc.) monitoring and assessment of the ▪ Increase in number and training of ▪ Pre-feasibility studies to validate sites mini-grid PPP projects AT2ER staff Technical and collect additional data on demand ▪ Increase in number and training of ▪ Continuous audit of AT2ER assistance ▪ Support for the implementation of a AT2ER staff performance mini-grid pilot auction and structuring ▪ Audit of AT2ER performance of associated subsidies ▪ Additional staff for AT2ER

▪ Structuring of, and financing for, a ▪ Results-based public subsidy ▪ Results-based public subsidy results-based public subsidy ▪ CFA credit line ▪ CFA credit line or guarantees (if Financial ▪ CFA credit line still required) instruments

▪ Technical assistance 2 ▪ Technical assistance 1 ▪ Technical assistance 1 Cost estimate ▪ RBF subsidy 5 ▪ RBF subsidy 10 ▪ RBF subsidy 13 (CFA bn) ▪ Credit line 14 ▪ Credit line 28 ▪ Credit line 36

SOURCE: team analysis 29 MINI-GRIDS To achieve the Togo Mini-grid Program, Togo will introduce a clear strategy to attract the private sector and maximize investment in mini-grids

Attraction levers Description Relevance to Togo

Calls for ▪ Calls for tender by AT2ER ▪ High – maintains mini-grid rollout momentum and tender within within the framework of the raises profile with developers the PPP above PPP framework ▪ Developers can suggest ▪ Average – provides an opportunity to test

methods Spontaneous their own projects outside innovative/different solutions (e.g. community Market entry Market entry non-PPP the above PPP involvement) but on its own is insufficient for large- offers scale deployment

▪ Temporary exclusive zones ▪ High – guarantees volumes to mini-grid developers for developers by stopping local competition Concessions

▪ Clarification of the pricing ▪ Average – discussions with developers show that Clarity of structure and other all regulations and incentives need to be clarified in regulatory regulations advance framework

▪ General improvement in ▪ High – Togo is #156 out of 190 in the Doing

Ease of doing the Togolese business Business rankings Regulatory Regulatory environment business climate

SOURCE: discussions with mini-grids developers, Doing Business, team analysis 30 CIZO program – Solar kits

555k+ Households electrified by 2030

31 DOMESTIC SOLAR KITS Solar kits should electrify 555K households by 2030

Total connections 100k 220k 235k 555k

Deployment targets Locations to be ~355 ~780 ~835 ~1970 electrified

2018-2020 2021-2025 2026-2030 Total

Installed ▪ Up to 85 MW solar generation capacity installed by 2030 capacity

Financing Business model

Total requirement: ▪ Private sector-driven deployment, with public support CFA 435 bn – Private sector responsible for all operations along the value 66 chain (e.g. kit purchase, distribution, payment collection, Private maintenance) 73 Public1 – Public sector provides indirect support for operations and 296 TA & IS helps give the most vulnerable access to kits through support mechanisms

1 includes 34 bn for electrification for productive usage SOURCE: team analyses 32 The Togolese model in the solar kit sector

▪ License grant based on: – Service and after-sales service quality over the long term with a preference for the energy as a service model – Minimum 20W with the option to upgrade for all operators – Minimum product quality (min. Lighting Global certification) – Machine to machine connectivity with the option to connect to the national platform

▪ 4-5 solar kit distribution licenses issued by 2030 in exchange for exemption from VAT and Customs duty

▪ No geographic concessions

33 DOMESTIC SOLAR KITS 1 Technical assistance and indirect support 2 Financial instruments 3 Public investment Support measures will be deployed along the solar kit value chain. Cizo participants will receive additional support

Project Cizo benefits Role throughout the value chain

Kit financing Distribution and Sales and Payment Repair and battery Consumer credit logistics marketing replacement

▪ Self and debt ▪ Kit import ▪ Self marketing ▪ Monitoring of ▪ Provision of N/A financing from ▪ Management, of products payment equipment to the monitoring and ▪ Agent collection from replace – parent payment of management consumers batteries and company distribution to with sales ▪ Partial defective Private – commercial POSs incentives acceptance of components operator banks risk of payment ▪ Project Cizo – financial default technician backers training in particular products

▪2 Credit line 1 – Logistics ▪ Public ▪1 Mobile payments ▪ Solar 2▪ Support for one – POSs awareness via different academies and or more campaign about operators technician microfinance the kits included on the training bodies via a ▪ Facilitated 1 Training and same domestic ▪ Network of local credit line import methods Govern- supply of sales platform technicians 2▪ Credit office fed and procedures ment inter- agents ▪ User training in with household vention kit use use data • Provision of 3▪ Level 1 market data subsidies2

1 Discussions with solar kit operators 2 Feasibility TBC SOURCE: team analysis 34 DOMESTIC SOLAR KITS 1 Favorable environment 2 Financial instrument 3 Subsidies Add. cost without tax exemption Cizo project initiatives will cut operator costs and make prices more affordable for consumers

Type % cut per of intervention Description Impact per kit, (CFA 000) type

Total initial cost to ▪ Price for a 50 W BBOXX kit (including VAT/Customs N/A 184 205 consumer exemption)2 + cost of financing (~13%)

-10 78% Distribution and ▪ Preferential tariffs (-20%) if State logistics used (La logistics Poste for transport, warehousing) -1 30% Marketing and ▪ Roadshows to raise consumer awareness3 sales 1 -2 40% ▪ Mobile payments on one single platform (50% cut in Payment collection commission) -2 50% ▪ Training of local agents in maintenance via solar Repair/replacement 1 academies and of consumers in kit use -1 12%

Operation ▪ Financing costs reduced from 10% to ~2.5% (bank 2 financing rate vs concessional loan) 0

▪ Financing costs reduced to 5% from 13% (Togo 67% microfinancing loans) -15 3 Consumer credit ▪ Subsidy TBD for the most sensitive populations

Total cost after ▪ Total cost = Sale price + financing cost (for N/A 154 16% interventions consumers that need it)

The Cizo project supports the expansion of the market for solar kits at the preliminary stage, while preferring quality DESCOs

1 ~$542 K total cost of solar academies to train 3000 agents to deal with the 300 000 kits forecast for the Cizo project (~$2 per kit); 2 ~$30 deposit then $30 a month for 36 months = ~$390 or ~CF 204 K at present, minus 18% for exemption from VAT and Customs duty; 3 Marketing expense = 1/3 roadshows vs 1/3 media support and 1/3 equipment production; 4 Market creation cost is the initial layout payable by all new operators e.g. operating license, logistics partnership, warehousing SOURCE: IFC, team analysis 35 DOMESTIC SOLAR KITS NOT EXHAUSTIVE ESTIMATES In locations with solar kit electrification, coverage for productive usage must be ensured Examples of productive usage that must be covered in locations with solar kit electrification Total cost6 Possible financing Quantification of need CFA bn methods 1 ▪ ~35k solar lamps 30 ▪ Pre-financing and Street ▪ 100W required capacity per repayment through a lighting lamp2 fee paid by the location

▪ ~110 kindergartens, ~1550 3 ▪ Pre-financing and primary schools, ~60 high repayment by the Schools schools3 Government Target is 555 K ▪ 100W-250W required connections by capacity per school solar kit by 2030 in over ▪ 50-100 health centers to be 1 ▪ Pre-financing and 4 1900 locations Health electrified repayment by the centers ▪ Min. 1000W capacity per Government center 5 ▪ 4-5k solar pumps N/A ▪ Pre-financing and ▪ Required capacity depends repayment by users Irrigation on irrigation needs and pumps borehole depth

1 Based on 1 lamp per 80 residents in the electrified zones in Togo 2 ARSE recommendations 3 IDATE data 4 Based on 280 non-electrified health centers in the country 5 Based on 10K boreholes identified in the country 6 Cost over 20 years includes generation only SOURCE:data from IDATE, Powering Health (USAID), ARSE, Health Ministry, team analyses 36 DOMESTIC SOLAR KITS The total Togo solar kit finance requirement is ~ CFA 435 bn

Technical assistance and indirect support (CFA bn) Description ▪ Tax exemptions for Lighting Global certified solar kits

Tax incentives 44 ▪ Technical assistance to finance: – review of the regulatory framework – creation of a national platform accessible to all operators that collects credit history Technical assistance – Indirect support linked also to awareness campaigns, and other indirect 23 the training of local maintenance agents and the support deployment of e-money agents

Credit lines 296 ▪ 5% interest CFA credit line (could include financing for productive usage) ▪ Guarantees for operators to cover default risk caused by accelerated rollout in certain zones

RBF subsidies 73 ▪ Results-based financial subsidies (e.g. number of installed connections, especially for productive usage )

Total 435

SOURCE: discussions with mini-grid developers, Doing Business, team analysis 37 MINI-GRIDS Mini-grids: strategic roadmap and finance requirements

2018-2020 2021-2025 2026-2030 Demonstration Acceleration Consolidation

▪ Review regulatory framework ▪ Continue CIZO program ▪ Review CIZO program and gradual ▪ Expand CIZO program ▪ Acceleration thanks to RBF subsidies return to market dynamics Aims ▪ Improve AT2ER capacity

▪ 2-3 solar kit operators on the market ▪ 4-5 operators on the market ▪ 4-5 operators on a competitive market Results ▪ 100 000 solar kits sold ▪ 220 000 additional solar kits sold ▪ 235 000 additional solar kits sold ▪ Demonstration of RBF subsidy ▪ Acceleration of RBF subsidies ▪ Assessment and adjustment of CIZO ▪ Selection of 1-2 new operators ▪ Selection of 2-3 additional operators ▪ Review and adjustment of the CIZO ▪ Support in the regulatory framework ▪ RBF subsidies launched full-scale to program (e.g. study of the gradual review (standards, pricing, VAT and support national priorities (vulnerable reintroduction of taxation) Customs, data protection etc.) pops, public usage, agriculture etc.) ▪ Possible continuation of RBF ▪ In-depth market survey (demand) ▪ Support for AT2ER and ARSE in the subsidies Technical ▪ Structure of RBF subsidies monitoring and assessment of the ▪ Increase in number and training of assistance ▪ Launch of training program CIZO program AT2ER staff ▪ National data platform comes on line ▪ Improved data platform ▪ Continuous audit of AT2ER ▪ Awareness campaigns ▪ Increase in number and training of performance ▪ Additional staff for AT2ER AT2ER staff ▪ Continuous audit of AT2ER performance ▪ Structuring of, and financing for, a ▪ RBF public subsidy ▪ Results-based public subsidy (if still results-based public subsidy ▪ CFA credit line and/or guarantees required) Financial ▪ CFA credit line and/or guarantees ▪ CFA credit line or guarantees (if instruments still required)

SOURCE: team analysis 38 Grid extension plan

960+ new locations connected by 2030

households in already electrified 400k locations but still to be connected

39 GRID EXTENSION Grid extension and densification: target ~670K connections by 2030, including ~400K in already electrified locations

Total connections 120k 270k 280k 670k

Of which in already 80k 150k 170k 400k Rollout targets electrified locations Locations to be ~145 ~430 ~390 ~965 electrified 2018-2020 2021-2025 2026-2030 Total

Installed ▪ Around 108 MW additional capacity to be installed, with the focus on the capacity use of renewables (e.g. solar, hydro)

Financing Business model

Total requirement: ▪ Deployment of additional connections CFA 412 bn 6 63 managed by CEET and AT2ER with ad hoc private sector contracts for some projects based Private on competitive tender Public ▪ Public finance could be RBF (for both already TA 344 electrified and still to be electrified locations)

SOURCE: team analyses 40 GRID EXTENSION Total finance requirement to extend and densify the grid is ~CFA 412 bn

Technical assistance & indirect support (CFA bn) Description ▪ Technical assistance to finance: – review of the regulatory framework Technical 6 assistance – technical studies of grid extension to new locations and its densification

▪ Guarantees for IPPs Credit lines 63 ▪ Private concessional financing

▪ Structuring and financing of an incentive system to Subsidies 344 densify and expand the grid

Total ~412

SOURCE: discussions with mini-grid developers, Doing Business, team analysis 41 GRID EXTENSION Grid: strategic roadmap and finance requirements

2018-2020 2021-2025 2026-2030 Demonstration Acceleration Consolidation

▪ Review regulatory framework ▪ Acceleration in growth of RE generation ▪ Acceleration in growth of RE generation ▪ Grow RE generation ▪ Simultaneous continued extension and ▪ Accelerated extension of the grid Aims ▪ Grid extension and intensification densification of the grid and completion of densification

▪ 19 MW solar and hydro generation ▪ 44 MW solar and hydro generation ▪ 45 MW solar and hydro generation ▪ 40 000 connections through extension ▪ 120 000 connections through extension ▪ 110 000 connections through Results ▪ 80 000 connections through ▪ 150 000 connections through extension intensification intensification ▪ 170 000 connections through intensification ▪ Review and adjustment of the regulatory ▪ Continued program of competitive IPP ▪ Continued program of competitive IPP framework (PPP and IPP frameworks, calls for tender (generation) calls for tender (generation) reservation and dispatch requirements, ▪ Technical studies for grid extension to ▪ Technical studies for grid extension AT2ER/CEET scopes) new locations to new locations ▪ Support for the structuring and launch ▪ Technical studies for grid densification ▪ Technical studies for grid Technical of competitive IPP calls for tender in already connected locations densification in already connected assistance ▪ Technical studies for grid extension to ▪ Continued audit of performance locations new locations ▪ AT2ER/CEET coordination ▪ Continued audit of performance ▪ Technical studies for grid densification ▪ AT2ER/CEET coordination in already connected locations

▪ Structuring and financing of an ▪ Continuation of the incentives system to ▪ Continuation of the incentives incentives system to densify and densify and intensify the grid system to densify and intensify the grid Financial intensify the grid ▪ Guarantees for additional IPPs ▪ Guarantees for additional IPPs instruments ▪ IPP guarantees ▪ Concessional private financing ▪ Concessional private financing ▪ Concessional private financing

▪ Technical assistance 2 ▪ Technical assistance 2 ▪ Technical assistance 2 Cost ▪ Grid ext/dens subsidies 62 ▪ Grid ext/dens subsidies 139 ▪ Grid ext/dens subsidies 143 estimate (CFA bn) ▪ Private financing and 11 ▪ Private financing and 26 ▪ Private financing and 26 guarantees guarantees guarantees

SOURCE: team analysis 42 Table of contents Government's vision for universal electrification

Current situation

A new approach to universal electrification

▪ Market segmentation

▪ Business model

▪ Financing the vision

Roadmap

Annexes 43 To achieve universal access by 2030, private operators will require ~CFA 438 bn in private investment and ~445 bn in public investment

Total investment over 20 years1 (CFA bn )

412 6 63 344 Grid

147 40 79 Mini-grids 28

435 66 296 Solar kits 73

Total cost Technical assistance Private Public and indirect support investment2 investment3

~995 bn ~112 bn ~438 bn ~445 bn

1 investment includes electrification for productive usage e.g. telecoms towers, schools, La Poste 2 Proportion of cost covered by the consumer 3 Viability gap to be covered by RBF from Government or its partners SOURCE: discussions with mini-grid and solar kit operators, team analyses 44 Togo’s traditional financial backers have actively funded NOT EXHAUSTIVE the energy sector in the past S Subsidies AT Technical assistance Previous investments P Loans Financial Total backer Total term (CFA bn) Projects financed

P ▪ Extension of Lome’s electricity grid (cofinanced with the EU, €30 M) S 2013- 20 ▪ Research to harness hydroelectric potential ▪ Technical assistance to CEET TA ▪ Extension of Lome’s grid (€7.8 M) S ▪ Review of the legal and regulatory framework of the energy sector 2015- 20 TA ▪ Transborder electrification of rural communities in Southern Togo from Ghana (12 locations) and Benin (8 locations)

▪ Upgraded generation/distribution capacity for CEET (phases I and II) P 08-16 15 ▪ Dismantling of “spider web” grids in Lome (Detsicope and Djagble)

▪ Extension of Lome’s grid (€10 M) and transformer sub-station at Davie/Lome (€12 M) S ▪ Renovation of the hydro-electric plant at Nangbeto (€11.5 M) 14-16 30 TA ▪ Construction of a West African Power Pool (WAPP) power transmission line - (€13 M) ▪ Technical assistance to CEET ▪ Upgrade and extension of the CEET power distribution network phase 2 – zones targeted: P 13-16 11 Lome, Tsevie, Tabligbo, Vogan, Notse, Anie, Blitta, Bassar, Tchamba, Mango, Cinkasse

▪ Electrification project for 150 rural locations (rural electrification phase 4) P 13- 15

▪ Access to power for rural communities in Togo (ER3) ~ CFA 8.5 bn P 13-16 9 ▪ Project for a transmission line Dapaong-Mango ~CFA 9.6 M

P ▪ Emergency power infrastructure upgrade project ~ CFA 26 bn (09-13) 2009- 46 ▪ Project to improve operating performance in the sector and provide access to electricity in TA the Lome region ~ CFA 20 bn (2017-)

SOURCE: AfD, CEET, KfW, press 45 The strategy for electrification by 2030 gives financial backers the opportunity to support Togo in a high-impact program

A GOOD BASIS FOR THE SUCCESS OF THE ELECTRIFICATION STRATEGY

Strong momentum, maximizing the likely Opportunity for financial backers to play an active 1 success of the electrification strategy thanks to: and crucial role in the achievement of the 2030 ▪ a clear national strategy in terms of its vision through: ambition and roadmap ▪ A regulatory environment now being ▪ specific and targeted allocation of available finalized that will encourage the solutions resources based on identified needs in both recommended in the strategy the short and long terms ▪ An institutional framework favorable to strategy deployment (e.g. creation of AT2ER), supported by strong political determination ▪ a results-based approach to financing that to achieve rural electrification will demonstrate impact

Approach based on clear and quantified ▪ stakeholder collaboration that will give 2 identification of needs, in terms of both type of need financial backers representation in the and deployment schedule strategy steering office

Focus on renewable energies, in line with the African 3 and global agenda for energy transition and sustainable development

46 In the medium term, a creative search for new sources of finance NOT EXHAUSTIVE will be essential Type of support Examples Implication for Togo

A Current ▪ Must obtain a position early on new partner Development 1 agendas partners ▪ Evidence the strong social impact of the B New projects

▪ Must give examples of success (+ guarantees for Commercial A the Togo environment) before new loans can be banks requested Profit-basis means economically viable projects Impact funds/ ▪ B must be submitted PE funds 2 Financial partners Long-term partners requiring the right to inspect Infrastructure ▪ C partnership projects funds

▪ Selective support process with high transaction D Climate finance costs for document preparation

▪ Profit-basis means economically viable projects Private A Private firms must be submitted 3 companies and Financing without material guarantees Company ▪ foundations B foundations

National A savings ▪ Government guarantees required to obtain: (i) national or (ii) regional investment 4 Other ▪ Risk of exclusion in the event of default means Market B projects are carefully selected investment

SOURCE: Off-grid Deal Database (GOGLA, 2018), team analyses 47 Potentially available financing would cover ~14% of the total requirement and up to ~85% of the short-term requirement Likelihood of firm-up Funds poss. available for electrification1 (CFA bn) Description Subsidies Loans Technical assistance TBC Already available

Bringing AT2ER into operation, production of written support and 3-4 mini-grid pilot 4 ▪ projects (pre-feasibility study and capex) 21 ▪ Electrification2 of 350 villages using a solar technology (technology TBD)

21 ▪ Signed loans available for solar mini-grids in 62 locations3

15 ▪ Signed loans to electrify 150 locations

20 ▪ Signed loans to electrify 112 locations in two phases

18 ▪ Energy sector reform and investment project for the energy sector

20 ▪ Annual credit line available (2 years in every 3) at reduced rates ▪ ~CFA 6 bn for the social component of 8 ▪ TA of up to ~CFA 2 bn CIZO

7 ▪ Potential donations for rural electrification using non-grid solutions

0,4 ▪ ~CFA 0.4 bn (USD 800K) in technical assistance for mini-grids

6 ▪ ~6 bn in concessional loans granted that can potentially be reallocated

Total 140 Potentially available financing would cover up to 85% of short-term, and up to ~14% of total requirement up to 2030 1 Based on our discussions 2 Credit line via Indian funds but subject to purchase of Indian equipment – can be used for solar equipment (kits/mini-grids) 3 Funds could be used for the Cizo project SOURCE: Meetings, team analysis 48 Table of contents

Government's vision for universal electrification

Current situation

A new approach to universal electrification

Roadmap

Annexes

49 The Togo electrification roadmap divides into short, medium and long-term horizons

2018-2020 2021-2025 2026-2030 Demonstration Acceleration Consolidation

Grid – new locations 40 120 110

Grid – already electrified 80 150 170 locations

Mini-grids 10 20 25 Connections

(000, not not (000,cumulative) Solar kits 100 220 235

Private investment 79 171 188

Public investment 81 178 186

Finance (CFA (CFA bn)

requirement requirement Technical assistance 20 43 49 and indirect support

Electrification at period end ~50% ~75% ~100%

SOURCE: team analysis 50 The review of Togo’s Renewable Energy Act indicates positive features but other points still need clarification

Main points in the current review of Togo’s Renewable Energy Act ▪ Exemption from tax and duty on the import/purchase of renewable energy equipment for domestic use, research and small companies (art. 15-16)

Main advances ▪ Offsetting allowed for renewable energy generation costs (art. 26) in the law

▪ Identification of institution responsible for equipment compliance with national quality standards (art. 45)

▪ Need/No need to connect renewable energy systems to the national grid (art. 7 & art. 29) Areas in the law to be ▪ AT2ER not mentioned in the Act and a technical committee (COTIPER) has addressed/ been created with a mandate that is similar at certain points (art. 10) clarified ▪ No exclusivity specified for the different types of non-grid solutions (especially concerning grid arrival by a given date)

▪ Conditions under which offset is permitted (art. 17) Areas requiring additional ▪ Criteria for the granting of permits, licenses and incentives to industry regulation

SOURCE: Framework bill for the promotion of power generation from renewable energies (2018) 51 Three key areas need to be addressed to strengthen the institutional framework of AT2ER Internal resources External financing Clarification of AT2ER mandate details Acceleration of recruitment program Diversification of sources of finance ▪ Following CEET/AT2ER mandate Employees per rural electrification Current sources of finance by rural clarification in March 18, additional agency (# FTEs) electrification agency (%) details are needed for: 80 – Schedule for the ordering of 59 CEET’s current rural 44% electrification projects 47 88% 88% – Retrocession methods for future projects managed by 55% AT2ER and leading to connection 12% 12% to the grid AT2ER Tanzania2 Uganda AT2ER2 Tanzania Uganda ▪ Detailed operating budget based by 20201 on identified needs ▪ Acceleration of recruitment ▪ Reduction in the heavy program to be on target by 2019 dependence on outside financing instead of 2020 (~55% vs 12% in Tanzania and ▪ Potential increase in capacity in Uganda) terms of number (47 FTEs vs 80 in ▪ CEET contribution defined by a set Uganda) and talent (e.g. shortfall in grid or a set equalization method geospatial resources) – Training/skills transfer programs to upgrade teams

1 AT2ER recruitment program 2 Based on 2018 financing - ~CFA 290 M budget of which ~CFA 100 M from CEET, ~CFA 30 M from Government and rest from subsidies - CEET contribution included under Fees for the moment SOURCE: Presidential Decree creating AT2ER, press 52 Monitoring of strategy execution must be ensured through reporting to the highest level and close coordination with all the stakeholders

PROPOSED SYSTEM FOR STRATEGY EXECUTION MONITORING

President of the Republic ▪ Presidential decision

Implementation Energy Ministry ▪ Owner of the electrification strategy and responsible for its effective implementation

Coordination Interministerial committee ▪ Representatives from Energy, Finance, Plan, Territorial Administration, Digital Economy, Basic Development, Agriculture, Planning, Trade ▪ Ensures proper coordination of strategy implementation and the alignment of all public sector stakeholders

Execution AT2ER CEET ▪ Responsible for rural electrification projects at the day to ▪ Coordination with AT2ER day level and for coordination with stakeholders (e.g. over rural electrification private sector, development partners) projects

SOURCE: team analysis 53 Table of contents

Government's vision for universal electrification

Current situation

A new approach to universal electrification

Roadmap

Annexes

54 MINI-GRIDS However, to make the solar mini-grid model viable, PPP support for Togo could help bring down costs to the consumer

Business models considered Relevance to Togo

▪ Operations for which the Government alone ▪ Limited given the financial and is responsible as plant owner technical constraints (see Public ▪ Finance arranged by the Government through ‘operating model’ section) its own funds or concessional financing

▪ Operations for which the private sector ▪ The private sector cannot alone is responsible as arranger of the effectively deploy mini-grids if finance required the viability gap is too great Private ▪ Electricity prices reflect operating and financing costs plus a margin for the investor

▪ Construction and operation handled by the ▪ Partnership creating an private sector environment attractive to the Public/private private sector that also takes partnership ▪ Government support with the regulatory environment, access to finance, pre- account of consumers’ ability to development and initial investment pay

SOURCE: team analysis 55 MINI-GRIDS 3 different mini-grid operating models that vary depending on the types and roles of the stakeholders involved 3 types of operating model

Public Private Community (national company)

Government or State-owned Private sector is responsible Community is responsible for entity responsible for for everything within a generation and distribution electricity manages all regulated environment within a regulated aspects of mini-grids environment1

The above models can be combined along the value chain (e.g. private sector handles pre- development, construction and maintenance, while the national company handles revenue collection)

1 Generally with the support of and/or coordinating with an NGO/private company SOURCE: Mini-Grid Policy Toolkit: Policy and Business Frameworks for Successful Mini-grid Roll-outs (EUEI, Inensus, GIZ, 2014) 56 MINI-GRIDS Given Togo’s limited experience with mini-grids, the private sector is particularly suited to handling all phases of installation projects, thanks to its expertise and operating knowhow

proven skill partial skill Private Commu Public1 Skills required at each phase of the mini-grid project sector nity

Technical expertise in system selection

Local expertise in estimating demand Project pre- development Local expertise in social and environmental impact studies

Business knowhow in finance and management discussions with stakeholders

Technological expertise in system construction

Construction Operating knowhow (management and monitoring of all constructors working at the same time)

Financial capacity (e.g. short-term operations) Maintenance Technical skills (e.g. component replacement, simple repairs)

Relations with local communities (e.g. to collect payment, Operation & disagreements during negotiations) payment collection Ability to stimulate additional demand

1 ’Public’ means CEET, which has limited experience in mini-grid management. Assumes private sector firm selected by competitive tender requiring previous experience in mini-grid construction/management SOURCE: discussions, team analysis 57 Market segmentation, based on current demand by service level is between ~12 and 59% of the population at level 1 Level 1 Level 2 Daily consumption1, Breakdown by level of Region Wh, 2017 consumption, %

Savanes 348 59 41

Kara 582 12 88 Rural household demand is level 2 on average but Centrale 372 59 41 around 1/3 of households did not exceed level 1 in 2017 Plateaux 459 41 59

Maritime 479 24 76

1 estimation of daily consumption for an electrified household SOURCE: Investigation of rural household consumption (INSEED, 2014), ORDER 019-MME-MEF-MPRPDAT-MCPSP of 26-11-10, team analyses 58 The geospatial model for Togo electrification was developed in six main steps

6 Test of different 5 Best scenarios 4 technology for Generation each location 3 potential Addition of 2 productive to Estimated residential 1 residential demand Non-electrified demand household characteristics Identify non- Define level of Identify Identify Estimate costs Vary certain electrified consumption productive generation of installing key households by type of usages sources and each assumptions household relevant technology per to test their Identify types Map and capacities location impact on of location estimate proposed Project (urban/rural) demand for Select solutions demand for each usage cheapest each technology for Project household to each location demographic 2030 changes to 2030

59 DOMESTIC SOLAR KITS 1 Technical assistance and indirect support 2 Financial instruments 3 Public investment Project Cizo participants must meet key targets and report to the Government on specified priorities Project Cizo - operating methods

▪ Meeting of performance 1▪ Operating support standards i.e. (e.g. technician – Lighting Global standards training) – Life of system – Response time for repairs 2▪ Credit lines available to the operator and – Consumer to purchase consumers better kits – Machine to machine connectivity ▪ Connection target for the 3▪ RBF for lowest level most vulnerable (level 1) consumers2 populations1 ▪ Reporting on connections completed, payment level and supplementary data

1 Estimate based on Project Cizo feasibility study 2 Feasibility to be determined SOURCE: Presidential Decree on the operation of AT2ER, team analysis 60 ESTIMATE, FINANCE NOT CONFIRMED Short-term financing would cover most of the 2018-2020 requirement and ~15% of the total to 2030 Short-term finance requirement (2018- Finance potentially available and 2020), (CFA bn) potential allocation, (CFA bn3) Shortfall, (CFA bn)

Public 62 18 20 15 9

Grid Private 114 20 -92

TA1 2 2 -

Public 5 4 1

Mini-grids Private 14 21 -72

TA1 2 2 0.4 -

Public 14 3 11

Solar kits Private 53 21 32

i.e. ~14% of TA1 5 6 -1 total to 2030

Total ~168 ~132 ~36 1 Technical assistance 2 Remaining funds could be reallocated, e.g. to the private financing of solar kits 3 CEB loan not taken into account (less likely to be obtained) 4 Requirement linked to part covered by grid user payments over life cycle of project (20 years) SOURCE: Meetings, team analysis 61 GRID EXTENSION Grid expansion model remains in line with historic operation plus identified supplementary needs

Model consistent with current situation… … and identified supplementary needs ▪ CEET mandate for urban zones ▪ Additional maintenance needed on the includes grid – expansion works – Loss of operating efficiency plant management and observed (+17% incidents on the MT Operating – maintenance grid 2014-2016) model – Calls for tender to outsource some contracts to private operators

▪ Financing of grid expansion projects ▪ Need to increase self-financing mainly via external investors capacity for future projects ▪ External finance dependent on results to ensure extension work is efficient Financing of grid extension projects by source – for households in already electrified Financing (CFA bn) 2013-2016 locations that need to be connected Financial backers CEET – for locations to be electrified via the grid 98% 2% ~65

SOURCE: CEET, team analyses 62 The electrification program would create up to ~6300 direct jobs ESTIMATES Temporary Permanent # jobs created per technology to 2030 (Full Time Equivalents - FTEs)

~3390 ~6300 ▪ Direct jobs considered only: – Temporary jobs to ~3000 construct plant and technicians distribution lines ~3000 and trainers – Permanent grid and mini- (Cizo project) grid operation & maintenance jobs; sales agents and head office jobs ~230 ~390 (kits) ~2700 ~50 ~180 ▪ Indirect jobs and upstream ~2340 equipment manufacturing ~2160 jobs not included

~980 ~540

Grid MG SHS Total3

~20 ~5 ~7

# FTEs / MW1 # FTEs / 10K kits2

1 Benchmark based on Algeria, South Africa, Egypt and the Brighter Africa Report (McKinsey) 2 Benchmark (Mobisol, BBOXX, PEG Africa) 3 Total range depends on results per scenario (1 and 2) SOURCE: IRENA, Greepeace, IDC, IEA 63 BACK-UP Finance: the IMF does not expect public investment in energy to rise materially by 2022 Agriculture and animal Other Mining and energy Infrastructure and transport Health Teaching husbandry

Public investment 2010-2022 according to the IMF, (CFA bn) 380

33% 280 224-283

2% Annual investment 226 227 231 32% in mining and 208 213 energy is 3% of 19% projected 20% 32% 0% 3% 37% investment or ~CFA 1% 37% 0% 44% 7-8 bn p.a. 0% 0% 41% 60% 50% 37% 53% 45% 21% 9% 13% 10% 5% 3% 6% 9% 12% 5% 6% 7% 6% 4% 5% 7% 5% 7% 3% 4% 3% 2010 11 12 13 14 15 16 2019-2022

NOTE: Since IMF and Court of Auditors figures differ slightly, Court of Auditors figures have been multiplied by a factor for smoothing purposes SOURCE: Togo laws on financing 2010-16, Court of Auditors reports 2010-2016, team analysis 64