Rep(ortNo. 7104-COM f :Issues and Options in the EnergySector Public Disclosure Authorized

IJnuary 1988 Public Disclosure Authorized Public Disclosure Authorized

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Continued on inside back cover THE COMOROS

ISSUES AND OPTIONS IN THE ENERGYSECTOR

January 1988

This is one of the series of reports of the Joint UNDP/WorldBank Energy Sector Assessment Program. Finance for this work has been provided, in part, by the UNDP and the , and the work has been carried out by the World Bank. This report has a restricted distribution. Its contents may not be disclosedwithout authorisationfrom the Government, the UNDP or the World Bank. This Report analyzes the main issues facing Comorian poV:y makers in the energy sector. An overwhelmingshare of energy (nearly801) is supplied from biomass (essentiallywoodfuels and agriculturalresidues) and householdsare the main consumersof energy. The largest user of energy for productionpurposes are the ylang-ylangdistilleries, which exclusivelyuse biomass suppliedenergy. The main conclusionsand recomendations of the Report are that:

(i) greater efficiency in productionand use of all sources of energy should be the main goal of the Comoros' energy sector developmentstrategy (to minimize the costs of energy needed for economic and social development);

(ii) strong measures need to be taken to protect the vegetative (tree) cover of the islands,especially in ;

(iii) households,within their possibilities,need to cubstitute kerosene for woodfuelsand switch to improvedwood and charcoal stoves;

(iv) energy supply enterprisesneed to improve their operations,especially through trainingand by minimizing investmentcosts;

(v) pricing and tax policies should give users of energy appropriatesignals as to the true (economic)costs of the energy they consume to enable them to make optimal allocations;thus, electricitytariffs need to be revised to reflect the costs of and petroleumproducts prices need to be modified to more equitablydistribute the benefits of the decline in world oil prices; and

(vi) aurplusesby sector enterprises(especially SCH) need to be budgetizedand tax policy needs to be modified so that an orderly, transparenttransfer of revenues (taxes, duties, profits) can take place between the enterpriseand the State budget. AUUVIATIONS AND AC£1RObYS

SEP Brevet d'Etudes Professionnelles BTS Brevet TechnicienSupirieur CADER Centre d'Appui au D6veloppementRural CAP Certificatd'Aptitude Professionnelle CARE U.S. based, internationalprivate volunteer organization CCCE Caisse Centrale de CooperationEconomique () CEFADER Centre Federal d'Appui au DMveloppmentRural DC Director Gereral EEDC Electrit6 et Eau des Comoros FAO Food and AgricultureOrganization of the United Nations FED European DevelopmentFund GDP IDA InternationalDevelopment Association (World Bank Affiliate) IRR Internal Rate of Return IUT Institut Universitairede Technologie KPC Kuwait Corporation kgoe Kilograms of oil equivalent LRIC Long run marginal cost LV Low voltage MV Medium voltage NGO Non-governmentorganization O&M Operation and Maintenance PV Photovoltaic RD Regional Directors (DirecteursRegionaux) R&D Research and Development SCH Societe Comoriennedes Hydrocarbures SF SimultaneityFactor toe Tons of oil equivalent UNIDO United Nations IndustrialDevelopment Organization WFP World Food Program WMO World MeteorologicalOrganization aIRCT RQUIVALMS1/ 1984 437 CF (ComorianFrancs) - US$1.00 1985 448 CP (ComorianFrancs) - US$1.00 1986 346 CP (ComorianFrancs) - US$1.00 1987 (4 months) 301 CP (ComorianFrance) - US$1.00

FISCAL YETA

January 1 - December 31

ENE= TUrs SDANuDm

A Ampere c.i.f. Cost, insurance,and freight DWT Deadweighttons f.o.b. Free on board CWh Gigawatt-hour= 1,000,000kilowatt-hours (kWh) ha hectare 1 Liter kg kilogram kgoe kilogram of oil equivalent km kilometer kV kilovolt = 1,000 volts kVAR Reactive kilo Volt Ampere kW Kilowatt kWh Kilowatt-hour m meter m.c.w.b moisture content,wet basis Ins meters per second m3 square meters m cubic meters MW Megawatt = 1,000 kilowatts NPV Net Present Value t tonne - Metric ton - 2,204.68 pounds toe ton of oil equivalent w.b. wet basis

11 The exchange rate used in this Report is that of November 1986, that is, CF330/US$1.00. TABLE OF CONTENTS

Page

SUMKARY, CONCLUSION,AND RECOMMENDATIONS ...... i

I, ENERGY AND THE ECONOMY...... 1 Introduction...... -...... 1..-. Overview of Economic Development...... 2 Energy Demand and Supply.u p pl.y...... 3 Prospectsfor the Economy and Energy Demand.m n..d....t. 5 Energy Institutionstu...t...... i os**. 6 Energy SectorDevelopment Strategy ...... 8 Specific Subsectorsb. se..or..... 9

II. BIOMASS AND NEW AND RENEWABLEENERGIES...... E...... 10 Biomass Supply and Demand... s ...... 10 Forestry/Vegetative Cover Situation..u. a ... 10 Forestry and Land Ownership...... s...... 12 HouseholdEnergy Issues*e.....*..t....to...... 16 Interfuel Substitution...... o.9...o...o... 17 Ylang-ylang Distillation....oo9.o.. .. 18 Lime Producton...... 0...... so...... t20

Biomass Gasification..**...... 22 OtherRenewable Energies.e.r.gi...... 22 FutureBiomass Consumption 23 Recommendationscomm e n ... ta*t i o n s 24

III. ISSUES IN THE PETROLEUM SUPPLY AND DISTRIBUTION SUBSECTOR ...... oe...... o...... 27 Introductionand Background*..**...*....o...... 27 Pricing of PetroleumProducts*u... 27 Taxation Policy...... 27 Pricing of Specific Productso...u..ts...... s. 30 SCH Managementand InvestmentProgram**.*a.... 32 SuggestedInvestment Programs for SCH...... 34 Adequacy of Procurementand Supply Arrangements.... 35

This Report is based on the findirgs of a mission which visited the Comoros in October-November1986. The mission compositionwas as follows: Michel Del Buono (MissionLeader, economist),F. de Paula Coelho (economist),J. Baptista (consultant,power engineer/economist),H. de Montety (consultant, petroleum supply and distributionspecialist), Y. Dube (consultant, forestry specialist),and C.-P. Zeitinger(consultant, energy economistand biomass/newand renewablesspecialist whose participationwas sponsoredby the German Agency for Technical Cooperation,GTZ). A preliminaryversion of this Report was discussedwith the Comorian authorities in November 1987. IV. ISSUES IN THE POWER SUBSECTOR ...... o 38 Introduction**.*...... ,38

Electricity Demand Projections and Investment Progtam ..... 38 Demand ...... 38 Existing Investment Program...... 40 Issues and Recommendations...... 40 System Expansion Plan and Investment Program...... 41 Expansion Plan for Moheli...... 41 Expansion Plan for GrandeComore ...... 42 Expansion Plan for Anjouan...... e . 43 Alternative Investment Plans ...... 45

Issues in Electricity Pricing and EEDC Finances ...... 47 Present Electricity Tariffs...... 47 Connection Costs ...... 00 ...... 47 Characteristics of Present Tariff Structure..e..eeseso 47 Tariffs and Long-Run Marginal Cost (LRMC)...RMC)o*...... 48 Proposed New Tariff Structure.... 49 EEDC Financial Situation ... 51 Billing and Collectionl...... 52

Issues ...... O.*...54 OperationalEfficiency ...... 54 Facilities Operation and Maintenance,... 54 Mainennc.**.***...... 55 Supply Reliblty..****...... 55 Manpower and Training.*n....g...... 56 Training Nees.....e....ts ... 57

Summary of Main Power Subsector Recommendations*...... 58

TABLES

1.1 Population, 1 ..9 ...... 8 7 0 .... 1 1.2 Foreign Trade...... 0 ...... "...... 2 1.3 Energy Balance, 1985...... 4 1.4 Primary Energy Demand: Projections to 1995 ...... 0. 6 2.1 Comoros Biomass Supply and Demand in 1985 ...... 11 2.2 Land Use Statistics in Hectares...... so...... 13 2.3 Comparative Fuel Costs for Cooking...... 16 2.4 Cost Structure of Ylang-ylang Distillation...... 19 3.1 Comores: 1986 Petroleum Products Prices Build-Up...... 28 3.2 Illustrative Price Build-Up for Petroleum Products...... 31 4.1 Comoros: Alternative Electricity Demand Projections...... ': 39 4.2 Comoros: Alternative Power Subsector Investment Programs 1987-1995...... 60006 ... *...... 46 4.3 Comoros: Long-Run Marginal Cost of Electricity Supply.... 49 4.4 Comoros: Tentative Tariff Recommendations...... 50 AKSIS

1.1 C-tline of a Proposal for a Stove DisseminationProgram... 59 1.2 Distillationof YVang-ylang...... 61 1.3 Biomass Gasifier - Moheli...... 64 1.4 Terms of Reference ...... 67 1.5 Draft of Terms of Reference;Energy PlanningUnit (EPU) .. 68 1.6 Utilizationof PhotovoltaicPumps to Supply Drinki ng Water.. . a . .60.0e0000. #0...... 0 * 70 2.1 HistoricalDemand for PetroleumProducts...... 73 3.1 Long Run Marginal Costs (LRMC) of Electric Power...... 79 3.2 Critical Review and Economic Analysis of Rehabilitation of Small HydroelectricPlants in Anjouan and of the Tatinga Projec t ...... 0400. .*.0*00...... * 120 3.3 Forecastingand Planning Unit at EEDC...... 129 3.4 TechnicalAspects: Observationsand Suggestionson Operationand Maintenanceof EEDC Facilities...... 130 3.5 Demand Projections(Tables 1-13 ) 135 SUSIARY, ODICLUSIOgS,AND RZCOMIRDDTIOUS

1. The energy situation in the Co-oros is characterized by an overwhelming reliance on two sources of energy: locally produced woodfuels (and woody biomass), which supply 782 of energy needs, and imported petroleum products (whether used directly or to gererate electric:ty),which supply the remaining 22X of needs. A small hydro- electric potential exists but is not at present fully utilized; in any case, its contributiontowards meeting energy needs would be marginal.

2. Woodfuels and biomass are therefore of overwhelmingimportance to the welfare of the Comorian population,with electricityand petroleum productp catering essentiallyto a relatively well-to-dominority and to the needs of a small number of modern businesses. Furthermore,there are serious deficienciesin the few statisticsavailable on the Comoros and practicallyall figures in this report must be taken as indicatingorders of magnitude rather than precise measurements. This is especially so in regard to biomass and household energy problems. Furthermore, the ability of Comorian institutionsto carry out reforms is limited by the sheer (small) size of the islands and by a crippling shortage of experienced,trained people. With that in mind, this report clearly sets priorities for all the recommendationsit makes and proposes to help the Comoros to carry out some of them.

3. Energy consumption in the Comoros, at about 162 kgoe per capita, is relativelylow, as is per capita petroleumproduct consumption at 33.6 kgoe. This can be explained in part by the low level of income, and in part by high energy prices.

4. With the notable exception of the distillationof ylang-ylang essence--a major export--almostall energy is used for consumption by households rather than productionpurposes. The economicsof ylang-ylang processingare such that there are no economic substitutionpossibilities away from the presently used woodfuels. Even under favorable assumptions,using coal or gas oil would render the activity uneconomic.

5. Since the Comoros' endowment of energy resources is relatively poor and opportunitiesfor econcmic substitutionare limited, the main directionof the Comoros energy sector strategy should be to increase the efficiency of production and utilization of energy so as to minimize total energy needs and thereby the cost of energy to the economy. At the production level, this would mean strengtheningthe capabilitiesof the energy supply parastatals Eau et Electricite des Comores (EEDC)--the power utility--and Societe Comorienne des Hydrocarbures (SCH)--the petroleum import and distribution company--and to the extent possible, protecting the existing sources of woodfuels and attempting to increase the supply.

6. The most pressing issues which the Comorian authorities should address concern policies, investments, studies, and institutions. - ii -

Recoandations not to do certain things should also be considered of first priority. The main recommendationsare summarizedbelow.

First Priority: Policies

(a) The Government should review energy pricing policies in all subsectors:

(i) In fuelwood, the Governmentshould attempt to erforce the payment of stumpage fees both for charcoal makers atnd loggers. The level of these fees should be reviewed and the extension of such fees to privately owned forests should be seriously considered. Failing that, a tax equivalent to a stumpage fee should be assessed at the user level (for major users, such as woodworkingplants, saw mills, bakeries or restaurants,distillers, and lime calcinators; see Annex 1.4 for suggested Terms of R8ference). The objective is to increase end-use efficiency and encourage economic substitutions by increasing the price of wood nearer to its true economic and social cost (i.e., all costs of production and distribution plus the cost of replacing the forest stocks).

(ii) In petroleum products, following the 1985/86decline in world prices, the Government should act to reAistribute the benefits of lower prices which, so far, have been accruing mostly to SCH in the form of a high surplus. The Government should impose a levy on petroleumproducts (CF 100 per liter on all products, except diesel f¢r power generation and household kerosene which would pay CF 50 per liter). l/ The prices of gasoline and household kerosene should be reduced slightly,the price of automotive diesel should be increasedwhile the prices of diesel for electricity generation, and jet-kerosene should remain more or less constant (paras. 3.10-3.13). The excess profits of SCH for 1986 should be taxed away, except for small amounts needed for urgent investments and to write-off doubtful assets from the balance sheet of SCH.

1/ These levels of specific taxes are appropriatefor a broad range of world prices around present (mid-1987)ones. They would necessarily have to be revised in the event of large price or exchange rate changes. The Government and SCH agree that SCH surpluses should be more fully budgetized. This is an important step in improving public finances. - _ii -

(iii) In electricity,the tariff structureshould be amended to better reflect the economic costs of supply for each category of service. A two-part tariff (capacity and energy) should be adopted for all medium voltage (MV) and larger low voltage (LV) consumers (with the possibility of a two kWh-rate time of day/tariff to the largest consumers). A differenttariff for each island should be considered, as the cost characteristicsof each island are quite different. Approximate values for Long Run Marginal Costs (LRMC) capacity and energy charges have been calculated and are presented in the text (paras. 4.31-4.34)and in Annex 3.1.

(b) Increase the level of competitionand liberalizethe import of cement (thereby, it is hoped, lowering domestic prices) to limit demand for domesticallyproduced lime (which is made by calcinating the coral reef). Subsequently, outlaw the calcinationof coral which is wasteful of (biomass)energy and ecologicallydamaging.

Second Priority: Investtaents

Some of these recommendationshave been overtaken by events: the 5th group is already installed. Bids received for the Power Plant are even higher than the base-line costs. This may be an unavoidable consequence of the more limited competition which tied bilateral financirngcan elicit.

Electricity

(a) Reduce CEDC's investment program from CF 4.1 billion to CF 2.9 billion in the context of a least-cost investment program and tariff study in line with the followingsuggestions (see also Annex 3.1).

(i) Rehabilitating Units No. 1, 2, and 3 at Voidjou and investigatingthe possibilityof reducing the capacity of the fifth unit from 1.8 MW to 1.2 MW, in conjunctionwith a 0.6 MW captive diesel for the proposed a.ewhotel at . Negotiate a tariff with hotels that separatescapacity and energy charges.

(ii) Investigating the possibility of delaying the installation of the third unit at the proposed new Mutsamudu power plant.

(iii) Reviewing and reconsidering procurement procedures (making bidding more competitive) for the above two investmentsand the 20 kV line from Mutsamudu to , - iv -

as preliminarycost figures appear to be out of line with current world market prices (US$1,150/kW as against current range of US$750-900/kW for generating sets and US$57,200/kmas against a maximum of US$35,000/kmfor the 20 kV line).

PetroleumProducts

(a) Repair or replace the sea line for the Moroni petroleum terminal is the first priority--thecost of two lines of eight inches would be approximatelyUS$1 million (or CF 330 million).

(b) Repair existing or build a new tank for householdkerosene at a cost of, if new, approximatelyUS$300,000 (or CF 100 million).

(c) Construct a retention basin, drainage, and decantation facilities in Moroni at a cost of approximatelyUS$200,000 (or CF 65 million). The lack or non-utilization of these facilities causes economic losses and could also trigger a minor ecologicaldisaster.

(d) Improve the petroleum products supply system for Moheli (rehabilitationof service station, purchase of skid-mounted tanks, electric pumps, and heavy-duty drums) at a cost of approximately US$200,000 (or CF 65,000 million). The CF 1 billion petroleum terminal which is proposed is totally unjustified and would not even improve the reliability of petroleumproducts supply to Moh6li.

(e) Storage capacity i& Moroni is adequate and well-balanced. The economics of the large addition being considered (2 x 1500 m3 tanks) are marginal. This should be stuaied in greater detail (by mid-1988) compared to the cost of rehabi- litating one or two of the existing tanks. The cof.tof two new tanks being considered would be at least US$0.75 illion or CF 250 million.

(f) Any facilitiesfor aircraft bunkering should be paid for by the beneficiaries and not by SCH. Fuel sales should cover all operatingcosts of these facilities.

Third Priority: Studies and Institutions(Relative Priority is Indicated by Time Frame)

Fuelwood,Biomass, and Household Energy

(a) The Comorian authorities should conduct a critical review of the performance of the several forestry or forestry-related projects currently under execution in the context of a feasibilitystudy for a medium-sizeenergy plantationin and an agro-forestry project (multiple-use, farmer- planted trees) in Anjouan. The monitoring unit of the Centre FWd4ral d'Appui au DeveloppementRural (CEFADER)and the Energy Planning Unit should supervise this review which will probably require additional technical assistance. This study should be completedby the end of 1988.

(b) A study for a program to disseminate improved stoves, especially in the urban areas of Anjouan and in Moroni, should be considered rapidly (i.e., by mid-1988). Brief Terms of Referenceand a rough cost estimate are presented in Annex 1.1.

(c) A program to test kerosene stoves and then liberalize the import of the best ones, should be prepared in coniunctionwith a lower price for kerosene (discussedin Chapter III), and the pace of substitution of kerosene for woodfuels should be monitored, esuecially in Mutsamuduand Moroni. This is urgent and should be carriedout during 1988.

(d) A technical and economic study to recommend immediatemeasures to improve the fuel efficiency of ylang-ylang distilleries should be commissionedand carried out in mid-1988. At the same time, the Comoros should be helped to strengthen the Forestry Department to permit better control over forests and better enforcement of forestry legislation. Brief Terms of Reference and a cost estimate are presentedin Annex 1.2.

(e) Forestry legislation should be reviewed to extend Government ecological controls onto private wooded lands, forests or plantations on all islands, but especially on Anjouan where deforestation is most acute. Technical assistance would be necessary to prepare and execute the necessary tasks which could start in late 1988. Brief Termisof Reference and budget are shown in Annex 1.4.

(f) EEDC should accelerate its training programs so that counterparts to expatriate experts can be assigned (5-6 university-trained Comorians) and to ensure proper operation of the new diesel plant at Mutsamudu (for this task, 5-6 engineers/economistsand about 10 higher level technicians would be necessary). This training program could start in early 1988 and be completed by 1990 when the Mutsamudu power plant would be commissioned. Technical assistance is suggested to prepare a training program (see para. 4.53). EEDC has already begun to work on a training program and has already recruited several trained or easily trainableemployees.

(g) Plan to operate several plants in parallel in Anjouan so as to be able to use the small hydropower plants if further study - vi -

shows their rehabilitation is justified (confirming the mission's preliminary calculationsshown in Annex 3.2). This is a longer-termsuggestion which should be incorporatedin the design of the new Mutsamudu Diesel Plant and be ready to be implementedsoon thereafter.

(h) Improve EEDC operationsby:

(i) preparing and implementing a preventive maintenance strategyby mid-1988 (see Annex 3.5); and

(ii) commissioning a power system loss reduction study by mid-1988, which the Joint UNDP/IBRD ESMAP Program could consider,at the request of the Government.

Short Analyses Conducted by the Energy AssessmentMission

(a) The ideas of using coal for ylang-ylang distillationand of solar preheating of distillery water should be abandoned as uneconomic. Similarly, the generation of electricity from c.oconutshells and husks in Moheli is probably uneconomic. These conclusions are detailed in paras. 2.18-2.23 and in Annex 1.2 and 1.3.

(b) Wind and solar energy for water pumping also appear to be uneconomic under Comorian conditions (see Annex 1.6 and in paras. 2.25-2.27).

Institutions

(a) The Government should strengthen its ability to set and supervise basic policies in the energy sector by creating a small (two-person) Energy Planning Unit in the Ministry of Planning assisted by external consultantsas needed. This Unit should play an advisory role by studying and advising on longer-term problems (planning, coordination, substitution, household energy) with the help of external consultants who would also conduct on-the-job training for the Comorian staff of the Unit and, if practical, other government units. This Unit should also help the Governmentcontrol and coordinatethe investment programs of SCH and EEDC. Its tentative Terms of Referenceare summarizedin paras. 1.11-1.15and in Annex 1.5.

(b) EEDC should set up a small forecastingand planning group with two Comorian and two expatriatemembers. This Unit should give priority to demand studies and to reviewingreports and studies done by external consultants. To avoid excessive costs, the two expatriates could be selected so as to contribute to the management of EEDC in addition to working in this staff - vii -

group. This group should work as an advisory staff to the Director General EEDC. Its tentative Terms of Reference are outlined in Annex 3.3. I. EINEGY AND TUE ECOVOHY

Introduction

1.1. The Comoros Archipelago is located in the northern part of the Mozambique Channel, about half way between and Tanzania. The Federal Islamic Republic of the Comoros consists of three main i lands: Grande Comore, Anjouan, and Moheli, with a total area of 1,861 km . The fourth island of the Comoros Archipelago,Mayotte, remains under French administration. The islands are mountainous and have a tropical climate and a luxuriantvegetation. Indigenousforests cover about 163 km , with an additional 141 km of seriously degraded forests inter-plantedwith crop trees. An artificial agro-sylvo-pastoralformation of , ylang-ylang trees, cloves, fruit and forage trees, and others covers an important area of the total land mass (nearly 50X). Temperature varies little during the year, while rainfall varies considerably, from more than 4,000 mm at high altitude to 1,000-1,200mm on the dry eastern coasts. There are also wide microclimatic variations. There is occasional volcanic activity on Grande Comore, the last eruption having taken place in 1977.

1.2. With a populationof about 421,000 in 1987 and a growth rate of about 3Z per year, the country has one of the world's highest population densities. Even though less than one-half of the total land area is suitable for and animal husbandry, between 80-90 of the population depends on the primary sector for its livelihood. There are no known mineral resources,and geothermalenergy, which might have been considered to be present, is not exploitabledue to the geology of Grande Comore, which is made up of very permeable soils and rocks and thus cannot hold water. 1/

Table1.1: POPULATION,1987

Area Population Urban Area Density

(%) (kj. 2 ) (per k02)

GrandeComore 226,200 16.3 1,025 221 AnJouan 173,000 31,6 424 408 Moh6lI 21,800 32.7 211 104 Total 420,900 23.3 1,660 254

Source: ComorosCEN.

1/ Rainfall percolates through mass of the island and escapes to the sea. Thereforeit cannot be heated by the hot rock of the volcano. - 2-

Overview of Economic Development

1.3. With a GDP per capita of approximatelyUS$300 per year, the Comoros is one of the least-developedcountries. After independencein 1975, the Comoros went through a period of instabilityuntil 1979. Since then, the economy has recovered fairly rapidly, with real GDP increasing at an average annual rate of about 4%. However, this growth has been almost entirely a reflection of the heavy amounts of externally-financed public investments which accounted for between 35-50% of GDP over the last five years. GDP growth dropped from more than 4% in 1984 to less than 3% in 1985.

1.4. The economy of the Comoros is open with internationaltrade accounting for about 36% of GDP in recent years. Its negative balance of payments (on goods and non-factor services) averages nearly 30% of GDP. Imports have substantiallyexceeded exports because of relatively large foreign-financedinvestments and increasing food imports to match the rapid increase in population. Furthermore,the geographicalisolation of the Comoros results in high freight and insurancecosts, averaging44% of imports f.o.b. Exports consist essentially of three crops--, cloves, and ylang-ylang(an essence distilled from the flower of tree of the same name and used in fine perfumes)--which are subject to considerable fluctuation owing to changes in international market conditions. The processingof ylang-ylang,the main export crop, is also a heavy user of energy which is supplied essentiallyfrom biomass. The petroleum import bill in 1985 was CFA 2.2 billion or 33% of exports. However, this percentagemay well have decreasedin 1986.

Table 1.2: FOREIGNTRADE (USS millions)

1982 1983 1984 1985

Exports f.o.b. 19.6 19.5 7.0 15.7 Importsf.o.b. -22.8 -24.3 -29.7 -27.1 (of which petroleumproducts) 5.7 4.3 3.9 5.0 Trade Balance -3.3 -4.9 -22.7 -11.4

Source: Comoros CEM.

Energy Demand and Supply

1.5. Energy demand in the Comoros (78%) was met mainly by woodfuels (some 50,000 toe) in 1985 (see Table 1.3). In global terms, the. supply/demandbalance in biomass fuels is as follows: in Grande Comore, - 3 -

there is, for now, approximatebalance; in Anjouan, there is a clear and widening deficit; and in Moheli, there is a surplus. The remaining 22X of energy demand was met by imported petroleum products (13,855 toe), except for a minor amount of hydropower generation (50 toe). Re-exports of petroleum products (mainly jet fuel) amounted to 750 toe, the remaining 13,105 toe constituting domestic consumption. Overall per capita energy consumption is low (162 kgoe) when compared with similar low-income African countries (e.g., Seychelles- 477 kgoe, Sao Tome and Principe - 422 kgoe, Mozambique - 200 kgoe). Per capita consumptionof petroleum products is also low at 33.6 kgoe: Seychelles- 432 kgoe; Sao Tome and Principe - 122 kgoe; Kenya - 84 kgoe; Tanzania - 35 kgoe.

1.6. A sectoral breakdown by type of energy consumed in 1985 shows that 75% of total biomass consumption went to households for cooking purposes and 19% to ylang-ylang distilleries. The remaining 6X was consumed in copra-dryingand in lime-burning,while 2,042 toe of wood was used for non-energy purposes such as construction of dwellings and poles. In the case of petroleum products, 58% (7,573 toe) was consumed in the transport sector as gasoline, gas oil and jet fuel. Power generation consumed 26% (3,422 toe of gas oil), and households consumed 12% (1,638 toe of kerosene) for lighting and cooking. Finally, a breakdownof electricityconsumption by sector shows that households are the main consumers with 63% of total demand, while the administration (includingstate enterprises)consumed 18%, the constructionand industry sector 14%, and public lighting 5%. Primary Energy PetroleumProducts Jetfuel Charcoal Electricity Total iOmaess Hydroelectricity Gasoline Gasoll Kerosene

Gross Supply -- -- 50,019 Production 49,969 50 -- -- 1,233 -- 13,855 Imports -- -- 4,630 6,354 1,638 -- (750) -- _ (750) Re-exports -- - 6,354 1,638 483 63,124 Total AvailableSupply 49,969 50 4,630

B Conversion -- -- 3,472 0 Power Generation -- (50) -- (3,422) -- 120 -- 0 CharcoalProduction (120) ------__ __ (86) (61) (147) m ConversionLosses ------_------(917) (917) Trans. and Distrib.Losses _ -- - -- 1,638 483 34 2,494 62,060 Net Supply 49,849 0 4,630 2,932 i Consumption 1,638 -- 17 1,585 40,710 Households 37,470 ------9,728 Distilleries 9,728 -- -- 1,441 Copra Drying 1,441 ------17 337 1,564 Constructionand Industry 1,210 ------2,460 -- 483 -- -- 7,573 Transport -- -- 4,630 ------113 113 Public Lighting ------472 ------472 Public Works ------459 459 Administration 1,638 483 34 2,494 62,060 Net Consumption 49,849 -- 4,630 2,932

Source: MIssion estImates. - 5 -

Prospectsfor the Economy and Energy Demand

1.7. The growth that occured in the early 1980s was concentratedin services and public works, which account for over half of GDP. Agriculturaloutput, which accounts for 40% of GDP and produces 97% of exports, has probably not grown very much. Over the medium term, land scarcity and environmental deterioration caused by heavy population pressure on cultivated land will constitute the most important constraintsto GDP growth. Even if foreign aid were to continue at its current exceptionally high level, it is unlikely that the GDP growth experienced in the early 1980s will continue beyond 1985. However, for projecting energy demand, GDP is assumed to grow at 3-4% per annum, somewhat slower than earlier but still quite fast. However, because of the vulnerability of main Comorian exports to the uncertainties of internationalmarkets, and the lack of a solid base for future growth, the above scenario should still be consideredoptimistic.

1.8. Projectionsof future energy demand in the Comoros are subject to considerableuncertainty due to the unpredictableevolution of overall economic development. Table 1.4 summarizes the most likely scenario for energy demand in 1995 based on the followingassumptions:

(a) GDP annual growth of 3-4% (in line with World Bank macro- economic projections)and population growth of 3% during 1985- 1995.

(b) A slight negative decline in biomass consumptionas a result of the increasinglydifficult access to the forest, a switch to improved stoves and kerosene by urban households,and a gain of efficiency in ylang-ylangdistillation that should offset any increase in production.

(c) Elasticity of gasoline consumptionto GDP of +1.5 and to price of -0.3. Domestic gasoline prices (which are about four times c.i.f. costs) should derline somewhat in nominal terms over the next few years, cauai.,gsome decline in real terms.

(d) Gas oil consumption by the transport and public works sector growing at the same rate as GDP (although its domestic price could be raised somewhat).

(e) Threefold increase of kerosene consumption in Anjouan (from a small base) and increase of 50% in Grande Comore and Moheli as a result of the measures proposed (see Chapter III) to substitute away from biomass fuels (to preserve remaining forests and protect the ecologicalbalance). Table 1.4: PRIMARYENERGY DEMAND: PROJECTIONSTO 1995 ('000 too)

ompricit 1985 Share 1995 Share Growth Rate (%) (%)

Domestic Biomass Households 37,471 58.7 44,076 55.6 1.6% Distilleriesand Copra 11,169 17.5 7,566 9.6 -4% Lime, charcoaland misc. 1,321 2.1 1.793 2.3 3.1% Total 49,961 78.3 53,435 67.4 1.4%

Imported PetroleumProducts Gasoline 4,630 7.3 9,260 11.7 7.2% Gasoil for power generation 3,422 5.4 6,844 8.6 7.2% Gasoilifor transportation and public works 2,932 4.6 4,339 5.5 4% Kerosene 1,638 2.6 3,530 4.5 8% Jet Fuel 1.233 1.9 1,850 2.3 4a2% Total 13,855 21.7 25,823 32.6 6.4%

Grand Total 63,816 100.0 79,258 100.0 2.2%

Source: Comorianauthorities and Mission estimates.

1.9. In 1995, consumptionwill still be heavily dominated by biomass (67%). However, there will be greater shares of commercial fuels in overall energy consumption (petroleum products 24%, electricity 9%), while consumption of traditional fuels will still be increasing in absolute value. The growth rate of coansumptionof biomass fuels would be kept at 1.4% as a result of supply shortages and substitution of woodfuels by kerosene for cooking in urban households (especially in Anjouan), and of the expected efficiencyincrease in the distilleriesand the dissemination of improved cooking stoves in the three islands. Overall, consumption of traditional fuels would only grow at half the population growth rate, while consumption of commnercialfuels, starting from a low base, and benefiting from stability in nominal prices (i.ee., somewhat falling real prices), would increase at about twice the rate of populationgrowth.

Energy Institutions

1.10. No agency has responsibility for overall coordination of the sector under the current structure. The Ministry of Planning, the General Directorate of Public Works and, in the case of woodfuels, the Ministry of Production and Agriculture, are more or less in charge of the technical supervisionof the sector, and the Ministry of Finance is in charge of its financial supervision, but a global view of the whole sector and its problems does not exist. Nor is there any analysis of problems which transcend individual subsectors (such as substitution possibilities)or medium or long-termplanning.

1.11. Aware of these weaknesses, the Government is proposing to establish an energy department (Directionde l'Energieet des Ressources Hydrauliques)within the Ministry of Planning. A coordinatingbody is vitally needed and its creation is strongly supported, but it should be an Energy Planning Unit, rather than a full ministerialDirectorate for which there is at present no agreement and no staff. This unit should play a primarily advisory and policy coordinationrole. It should be responsible for preparing medium and long-term energy supply/demand forecasts that would allow both better government supervisionand better performance by sector enterprises (including better defined investment programs). It would also analyze household energy issues which usually transcendsubsectors and which are presently ignored by policy makers.

1.12. Inforw.mltionon forestry is necessary for overall energy sector management and should be gathered by the Unit. The Government'ssemi- autonomous Rural Development Agency, CEFADER, which has the main responsibilityfor the forestry subsector, is under the jurisdictionof the Ministry of Production. The CEFADER executes its projects through a network of Regional Rural Development Centers (CADERs). Thus, forestry projects are designed and executed in isolation from other energy agencies with the result that the CEFADER/CADERhave little awareness of the consei-uencesof their actions on present and future biomass energy supply.

1.13. SCH is the parastatal in charge of importingand distributing petroleum products since 1981. Petroleum production prices are set by the Government, but SCH enjoys a fairly high degree of autonomy in its operations,including procurement. Since the accounting system of SCH is still weak, the Ministry of Finance cannot obtain timely access to SCH's financial information, thus causing excessive delay in Government reaction (especially pricing and fiscal policies) to changing situations. Despite improvements in the past years, SCH accounting practices are inadequate as is analysis of new investments. Both are partly a reflectionof the lack of trainedmanpower. Several remarks and recommendationson SCH's managementare presented in Chapter III.

1.14. The Comorian power utility, EEDC, is under the technical supervisionof the Ministry of Planning and the financialcontrol of the Ministry of Finance, but neither Ministry has the necessary human and institutionalresources to set and supervisethe carryingout of the main policies and strategies in the power sub-sector. EEDC's Board of Directors is a predominantlypolitical body, while executive management (technical,administrative, and financial) is carried out by a Director General. As a result of overcentralizationand lack of a technically oriented Board, there is no long-term expansion plan, no comprehensive - a -

medium-term investment plan, and no background studies on tariff policies. For each island there is a Regional Director (RD) responsible for technical and administrative management, but RDs have little authority and often merely carry out the instructionsreceived from the center.

Energy Sector DevelopmentStrategy

1.15. The main direction of the Comoros' energy sector strategy should be to increase the efficiency of production and utilization of energy to minimize the costs of energy needed in the Comoros' economic and social development. Lacking indigenoussources of energy (except for biomass and a small hydroelectricpotential), the Comoros should strive to maximize efficiency in the conversion of imported petroleum products and to increase the end-use efficiency of both commercialand traditional (essentiallybiomass) energy.

1.16. Production. At the production level, this would mean improving the operational efficiency of SCH and EEDC. Proposals to do this are contained in Chapters III and IV. Improvementsin these two key energy suppliers would lower energy supply costs. Large-scale production of woodfuets is possible in Grande Comore, impossible in Anjouan, and not needed ;n Moheli. Distances between the islands are such that, at present prices, inter-islandtrade in woodfuels is precluded. Thus, the role of commercialwoodfuels plantationswould be limited.

1.17. In Anjouan, where the problem is most severe,only multipurpose tree-plantingwould be possible (with woodfuels one of several outputs). Since there is virtually no government land, tree planting should be carried out by the owners-farmersthemselves with appropriate incentives and support from Government institutions(CEFADER, Forest Service).

1.18. The Governmentneeds to control better the investment programs of SCH and EEDC. Recent, ongoing, and proposed investments (e.g., the Mutsamudu Petroleum Terminal, the Moheli Petroleum Terminal, the Fifth Generating Unit at Voidjou, and the size of the proposedMutsamudu diesel plant) are, to some extent, excessive (i.e., investment costs could be cut without any sacrifice in quality and reliabilityof service). The proposed Energy Planning Unit in the Ministry of Planning should be able to advise the Government on these matters. A number of suggestionsto reduce or postpone investments are made in the text, especially in relation to the power and petroleum subsectors.

1.19. Utilization. To maximize energy end-use efficiency, the Comoros should enact a suitable package of incentives. Prices, tariffs, taxes, and other direct incentives would have to be set in accordance with economic costs, or to offset market imperfections(e.g., under- valuation of woodfuels). The goals of this incentive framework for energy would be to provide energy at prices covering economic costs rather than to cut the consumptionof energy. Under these policies, SCH would probably be financially viable, but EEDC would not (due to high debt service and high internal costs). -9-

Specific Subsectors

1.20. Distillationof ylang-ylangessence, which is a major export, requires large amounts of energy, currently supplied by woodfuels. At recent prices of firewood (CF 2/kg by the truckload) and commercial fuels, no economic substitutionis possible.2/ Fuel savings to minimize the impact on biomass resources (while maintaining the activity profitably)could thus only accrue from increased efficiency in the use of woodfuels. Consequently,a campaign to increase the efficiency of the distilleries(approx. 200) should be mounted (see Annex 1.2). In order to make this campaign attractive to distillers,it should be coupled with an increase in woodfuel prices through better supervisionof felling to ensure payment of stumpage and other fees. If significantly improved enforcement of stumpage fees is not possible, then a tax should be imposed on each distillery using woodfuels (excluding trunks, husks, and shells which are in plentifulsupply). A similar tax (in lieu of a stumpage fee) should also be imposed on other major users (such as bakeries, restaurants, lime calcinators, , and woodworking plants).

1.21. Households. The problem of woodfuels is most acute in Anjouan, where populationdensities now reach nearly 400 inhabitants/km (and will exceed 500 by the end of the century). Urban households (about one-third of the total) are supplied with fuel from dwindling forest patches. While substitutionof kerosene for woodfuels should be encouraged among higher-incomeurban families, especially in Anjouan (and pricing policy recommendationswill go in that direction since kerosene is now rela- tively over-priced),woodfuels will remain the mair.source of household energy for a long time. This, together with stagnating incomes and rising woodfuel pric9s (especially in Anjouan), makes it mandatory to improve end-use efficiency of energy in households. To this end, this report recommends the further study of the substitutionpotential for commercialenergy (which is generally consumed more efficiently)and the launching of an improved stoves program focusing primarily on Mutsamudu and partly on Moroni and other agglomerations (see Annex 1.1 for details).

1.22. With some urban households switching to kerosene and rural families turning to improved stoves, consumptionof woody biomass at the end of the century should decline in Anjouan, be stable in Grande Comore, but increase in Moheli.

2/ Given the calorific content of wood and diesel and their conversion efficiencies,it is only at prices above CF 4-5/kg for firewood that diesel (at 1986 economic cost) begins to be competitive. With the costs of equipment conversion,a financialprice of CF 7-8/kg would be necessary. - 10 -

II. BIOKASS AND NEW AND RENEwABLE MERCIES

Biomass Supply and Demand

2.1. In the Conioros,energy needs are overwhelminglymet by wood- fuels and other biomass which account for about 80Z of national energy consumption. The two major categories of energy consumers, households (59%) and ylang-ylangdistilleries (16%), rely almost entirely on biomass for their energy needs. The bulk of the country's biomass supply (especially for rural households) is not drawn from the forests, but rather from agricultural residues (including residues from the cultivation of tree crops). 3/ A comparison of consumption with the theoretically sustainable annual biomass supply for the individual islands (Table 2.1) shows how much the situation varies from island to island. While Moheli still exhibits a substantialbiomass surplus and the situationon Grande Comore still appears to be manageable,in Anjouan it is clear that forestry stocks are being depleted. Since households and distilleries are the two most important consumer groups, energy conservationmeasures and fuel substitutionin these two areas should be implemented with priority, and specific measures are proposed in this report.

Forestry/VegetativeCover Situation

2.2. Original forest cover averages about 20% of the areas of Grande Comore and Moheli, and less than 10% of the area of Anjouan. In Grande Comore, most of the remainingoriginal forest is in the higher reaches of the Kartala, which has protected it from the depredations of the population. Deforestation,in the sense of a destructionof the original forest, is thus at an advanced stage, and is progressing. However, this disappearance of the original forest has proceeded pari passu with an increase in the area under a so-called "agrofroestry formation, i.e., dense forest being replaced by either sparse forest or other trees interplantedwith foodcrops (especiallybananas). The area under fiele crops (i.e., without any trees) does not appear to have increased significantlyover the past 15 years or so.

2.3. In Anjouan, deforestationhas progressed farther: some very steep slopes are bare and in danger of being eroded away. Similarly, many watersheds are now bare, with negative consequences for run-off,

3/ Falling coconut branches and seed pods provide the bulk of household energy supply in coastal areas. The dried stems of pigeon-pea plants (ambrevade) provide energy for households at higher elevationsfor several months of the year. - 11 -

replenishment of aquifers, and depth of water table. On the other islands, this is not yet the case. The measures being taken in Anjouan (under various forestry and land conservationprojects) are basically correct: a review needs to be done to determine which approaches (social, technical)work best, and to ensure that adequate resources are mobilized for these approaches. In Grande Comore, fuelwood plantations might be justified and their economic and technical viability should be investigatedfurther. In M6heli, no immediatemeasures appear necessary, other than legislative or regulatory changes designed to protect the vegetativecover.

Table 2.1: COMOROS BlOkf1Sk SJ. XLY AND DEMANDIN 1985 ('000 m' FlRErtiX1)1.,VALENT) a/

Grande Comore AnJouan Moh&lI Total

SustainableAnnual Supply Primary and SecondaryForests 28 4 9 41 FuelwoodPlantations 5 - 4 9 CoconutPlantations 104 47 38 189 Tree Crops 63 35 11 109 Other 17 5 2 24 Total 217 91 64 372

Demand Households 170 126 16 312 Distilleries 15 61 5 81 Copra Drying 7 3 2 12 Lime-burning,other 6 4 - 10 Charcoal 1 - - 1 Non-energyuses 11 6 - 17 Total 210 200 23 433

Gap +7 -109 +41 -61

a/ Conversion: 1 m3 of firewood = 0.95 m3 of coconut residues= .06 m3 of crop residues. Source: Comorian authorities, various World Bank Reports and Mission estimates.

2.4. Consumption in Anjouan works out at roughly double the yearly sustainableyield. Depletion of stocks is the unavoidable consequence. Slightly more than a quarter of aggregate biomass demand there is accounted for by the fuel requirementsof the distilleries,which are primarily responsible for the ongoing forest depletion on Anjouan. On the other hand, the biomass surplus in Moheli would be exhausted rapidly if substantialmigration from Anjouan were to take place. Finally, in Grande Comore, an accelerationof reforestationefforts, in conjunction with a revision of energy pricing policy to promote some substitutionin favor of kerosene (as proposed in Chapter III, through lower kerosene - 12 -

prices) by part of the urban population, would help to maintain the balance between supply and demand. For all practical purposes, the population has unlimited access to the remaining forest areas. As a result, the products of the biomass system are not valued in accordance with their replacementcosts, nor do their prices--in so far as they are monetizedgoods--reflect their true economic or social value.

Forestryand Land Ownership

2.5. On all three islands, primary forest depletionhas progressed to the point where the mountain tops are the only areas still exhibiting vestiges of the original tree cover. The largest remaining rain forest is located on the slopes of the Kartala, an active volcano on Grande Comore. However, the steady contractionof the remainingnatural forest cover in Grande Comore and Moheli is not entirely attributableto the fuelwood demand of the rural households. Rather, it is often due primarilyto:

(a) the growing share of total land area devoted to agriculture (even if some trees remain in associationwith food crops, some of which may also be trees);

(b) the fuelwood demand--and the modest charcoal requirements--of urban households;

(c) the fuelwood requirementsof the ylang-ylangdistilleries; and

(d) the wood requirementsof the sawmills.

2.6. In the Comoros, even in the absence of planned reforestation measures, regeneration of cleared areas is rapid: coppice regrowth quickly creates a secondaryforest cover. There is a gradual transition to agro-forestryas elevationsdecline, with tree density slowly decreas- ing and the share of land under food crops slowly rising. This agro- forestry cultivation pattern, and the country's extensive stands of coconut palms (some 1.6 million trees), are rich sources - biomass. Such "mixed" areas are of crucial importance for the islands' energy supply. Most Comorian farmers in effect practice agro-forestryon their land. In this form of cultivation,the trees (mangoes, coconut palms, breadfruit trees, etc.) not only produce food, they also protect against erosion, provide shade and fodder, and most importantly,produce wood for the energy and constructionneeds of households.

2.7. The Comoros' principal export crops--vanilla, cloves, ylang-ylang and copra--are tree crops as well. 4/ Thus, it can be assumed that, with the exception of ylang-ylang processing, their

4/ Vanilla is a vine, but it requiresa small tree on which to climb. - 13 -

production--andthe traditionalagricultural system in general--doesnot, at present, pose a threat to the ecology. However, increasingpopulation densities and the recent emphasis on field crops may threaten the tree cover. The and maize cultivation projects which are now being implementedwill require clear cutting of all trees, thereby exacerbating th.eincipient erosion problem.

Table 2.2: LAND USE STATISTICSIN HECTARES (basedon 1983-84aerial photographs)

Grande Category Comore Anjouan Moh6li Total %

Natural Bush and Forest 23,645 3,127 3,583 30,355 18.4

Agroforestry: Plantations(wood, fruit, cash crops) 1,398 3,387 680 5,465 3.3 Food crops in associationwith trees 54,012 26,441 15,530 95,983 58.3

Grasslands,permanent field crops, or area without vegetation 22,045 9,245 1,307 32,797 19.9

Total Area (incl. lakes and swamps) 101,100 42,400 21,100 164,600 100%

Note: The area of Grande Comore is calculated to be 1,011 km2 rather than the commonly acceptedfigure of 1,025 km2 which is used elsewhere in this report. Source: Agrar und Hydrotechnik,March 1987 (done under IDA financing).

2.8. As can be seen from the above figures, the dominant form of land use is the association of trees and food crops (accounts for 58% of total area, but 62% of area in Anjouan). This formation has grown markedly in the last 15 years, at the expense of natural bush and forest. Furthermore,it is estimated that about 61% of the total area of Grande Comore is under cultivation,77% of Moheli, and 80% of Anjouan, although the area under pure field crops is minimal. The report by Agrar und Hydrotechnikmentioned above also states that all cultivable land is under cultivation(mostly under trees or trees and associated food crops) and expansionof agriculturalarea is now nearly impossible. Farmers are now beginning to shorten (or eliminate) fallowswhich could be extremely dangerous ecologically (soil fertility would fall and result in destructionof soils).

2.9. A complicated land tenure results from a succession of different socio-politicalsystems such as the "Sultanats,"French colony, and independence. Three main categories of land ownership prevail, in addition to complex rental and sharecroppingarrangements: - 14 -

(a) collectiveownership (never officially recognized);

(b) private ownership (which includes most agricultural land and plantations and a portion of forests which belong to individualsor private companies);and

(c) state land, which includes all vacant or unowned lands. It is estimated that about 20Z of the land belongs to company estates, 40% to the government (largely on Grande Comore) and 40Z to Comorian individuals.5/

2.10. There is an urgent need to revise the forestry legislationto adapt it to today's situation. This task should be conducted with the assistance of the Energy Planning Unit and the CEFADER but would require additional technical assistance. The present forest legislationis old and outdated. Its aim is only to regulate harvestingoperations in state forests but private forests are excluded from its field of application. A 1955 decree imposes limitationson the clearing of certain forests and allows the reforestationof lands threatened by erosion, but does not control harvestingon private lands. To a large extent, the legal frame- work and cultural habits imply that forests belong to everyone. It is this free access that has led to over-exploitationof forest resources in Anjouan and, to a lesser extent, in Grande Comore. New legislation should attempt to involve the population in sound forestry and land conservation practices and to enforce them on both private and state land. 6/ It is also clear that the Comoros will need help to strengthen the Forestry Department in order to improve control over forests and enforcement of forestry legislation, especially when various types of forest reserves are created.

2.11. There are five on-going projects directly or indirectlyrelated to the forestry subsector. These are: (a) The World Food Program (WFP) (US$7 million, 1980-84) which provides food aid for land terracing and tree planting for erosion control and whose results have been disappointingdue to insufficienttechnical supervision and follow-up.

(b) The International Development Association (IDA) Agricultural Project of US$5.7 million which aims to increase copra production by replanting aging coconut trees with improved varieties, reduce crop losses through rodent control, and improvecopra processing.

5/ World Bank estimates,1983.

6/ Existing legislationapplies only to governmentlands. Since there are no government lands in Anjouan (and little elsewhere), legal modifications are necessary that set standards, rules, and regulationson the use of privately-ownedforests or plantations. - 15 -

(c) The IDA Rural Services Project whose forestry component (US$1.3million) aims to reinforce the forestry institution (CEFADER/CADERs)in order to develop farm forestry and land conservation programs; its scale is really that of a pilot project.

(d) The Food and Agriculture Organization (FAO) Integrated Rural Development project, which provides technical assistance in Anjouan for soil conservation and reclamation through reforestation,is evolving in the (correct)direction of multi- purpose tree planting.

(e) The Soil and Land ConservationProject being undertakenby CARE (an internationalNGO) on Anjouan to promote soil and water conservationactivities among local farmers, primarily through reforestationof watersheds.

Although all these projects result in the planting of trees, they have a multiplicity of objectives of differing importance. Furthermore, the scale of activities under these projects is not commensurate to the alarming conditions of Anjouan. The WFP activities aim primarily at distributingfood, a useful joint output (e.g., trees) being of secondary importance. The coconut renovationproject will only create a one-time excess supply of coconut trunks, whose energy utilization is not easy. The soil and land conservationproject (CARE) has primarily ecological objectives. In the final analysis, the IDA-assistedforestry component of the Rural Services Project and the FAO-assisted Rural Development Project are the only activitieswhose main goal is the planting of trees (for fuel and other purposes). In view of the differing situations on Grande Comore and Anjouan, the pure energy forestry approach should be confined to Grande Comore (both the present IDA-assisted project and eventual future plantation projects) while multipurpose tree-planting would need to be expanded in Anjouan but would be equally useful in Grande Comore. It should be noted that energy plantationscould only be established away from population centers (and represent reserves with restrictedaccess) while multipurposetrees would generallybe planted in the immediatevicinity of settlementsand be easily accessible.

2.12. In conclusion, this report recommends expansion of both agroforestry through the farmers' planting of multipurpose trees (especiallyin Anjouan, but also useful elsewhere)and energy plantations whose probable feasibility(which still needs to be confirmed)is limited to Grande Comore. While not specifically a part of this study, the urgency of protecting the remaining vegetative cover (crucial for the maintenanceof ecologicalbalance) strongly suggests the need to slow the rate of populationgrowth. - 16 -

Household Energy Issues

2.13. Nearly 75% of all biomass energy consumed in the country goes to meet the cooking fuel needs of the household sector. Outside the towns, all cooking is done with either wood or woody biomass, which are not yet monetized goods in rural areas. The amount of time rural households must devote to gathering firewood is substantial. Table 2.3 gives a rough idea of the comparative cooking costs of the various domestic fuels for urban households. These figures help explain prevailing household fuel preferences in the Comoros, thus making it easier to identify basic energy-policypriorities and develop appropriate strategiesto alleviatethe current pressureon the biomass system.

Table 2.3: COMPARATIVEFUEL COSTS FOR COOKING a/

Estimated CF/ Kcal/ End-use CF/ US Cents Fuel Unit Unit Unit Efficiency 1,000 kcal 1,000 Kcal c/

Wood b/ kg 20 3,500 10 57 17.3 Charcoal kg 125 7,000 20 89 27.0 Kerosene liter 210 8,380 40 63 d/ 19.1 d/ LPG kg 800 10,800 55 135 40.9 Electricity kWh 120 860 65 215 65.2

a/ Market prices (Moroni)apply to large quantities (>5 kg). Especially in the case of wood and charcoal, the market price for small quantitiesmay be considerablyhigher than the figure quoted here. b/ Air-dried(20% m.c.w.b.);most wood is burned in a 3-stonehearth. c/ CF 330/USS. d/ With kerosense sold at, say, CF140/liter, 1000 Kcal (useful)would cost CF42 or USS0.123and thus be cheaper than usefulenergy supplied firewood. Source: Mission estimatesand computations.

2.14. While its price may seem high in absolute terms, wood is the cheapest cooking fuel available to urban households. Most people in the cities cook in the same way as the country's rural inhabitants, i.e., over a 3-stone fire. Even if fires were carefully tended and cooks practiced good fuel management, the end-use efficiency of wood burned in such a stove, which is open on all sides, would seldom exceed 10%. The end-use efficiency of wood combustion could easily be increased to at least 20% through the use of an improved one-pot metal stove (see Annex 1.1). While appliance costs will affect these comparisons,that between kerosene and fuelwood would not be substantiallymodified. - 17 -

InterfuelSubstitution

2.15. At present, kerosene for cooking is used in few households. Aside from a general reluctance to change traditional cooking habits, which tend to impede a switch from wood to other fuels, there are three principal obstacles to the widespread use of kerosene as a domestic fuel: the high price of kerosene, recurrent supply shortages, and the poor quality of the burners presently availableon the local market.

2.16. Many governments subsidize kerosene (to alleviate pressure on the biomass system) while in the Comoros it is taxed rather heavily. Jet fuel quality kerosene 7/ is purchased by SCH for CF 40/liter 8/ and sold at petrol stations for CF 200/liter. This price spread is accounted for by the retail mark-up, by various taxes amounting to about 40X of c.i.f. cost, and by a large profit margin. 9/ Since world prices fell markedly in late 1985, and the eco-system of the islands is seriously endangered, it seems desirable, as well as opportune, for the Government to revise its kerosene pricing policy to promote substitutionof kerosene for fuelwood. The high taxes currently collected on kerosene give the Government considerablescope for lowering the price of kerosene without reducing it to below economic cost (this issue is discussed in greater depth in Chapter III). Given the end-use efficiencies, even a small reduction in the retail price of kerosene could make it competitivewith wood and lead to gradual fuel substitu- tion, especially in urban areas. When available (there are frequent supply shortages), service stations sometimes sell kerosene above the official retail price set by the Government. However, since there are no service stations outside the cities, many of the middlemen 10/ who deal in kerosene charge their rural customers between CF 240 and 300/litre.

7/ While jet fuel is more expensive than household kerosene, small shipment and handling costs for a distinct product probably outweigh any purchase price savings.

8/ CF 115/liter in 1985. C.i.f. Moroni costs fell to CF 40/liter during 1986. Economic cost in 1986 is estimatedat CF 75-80/ liter.

9/ Pricing of petroleumproducts, includingkerosene, is discussedmore fully in paras. 3.9-3.12.

10/ There are no petrol stations outside of the main towns. Once purchased (in bulk, say in 200 liter containers) kerosene must be transported to villages and resold retail (by the liter). City customers are not penalized by these additionalmargins. There are no large capital requirementsnor significantbarriers to entry into the kerosene trade which seems basicallycompetitive. A lower pump price would certainly lead to a lower final price in the cities (where kerosene would be used for cooking) and most probably also in the country (where kerosene is used for lighting). - 18 -

In the Comoros, kerosene is combusted in wick stoves. While the standard burner (of Chinese design) is an inexpensive (CF 4,000-5,000) and basicallya serviceabledevice, it exhibits certain weaknessesnot found, for example, in the "Ashok" and "Nutan" brand stoves. The latter are more user-friendly and efficient than the Chinese model at comparable costs,

Ylang-ylangDistillation

2.17. As indicated in Table 1.3, the ylang-ylang industry is the largest consumer of energy in the Comoros (after households)accounting for 16Z of final energy consumption. Followingthe achievementof record production levels in the mid-1970s, output gradually began to decline. In 1985 the Comoros exported 60 tonnes of ylang-ylang. This downward trend may be attributed above all to the pressure of increasing food needs, which has boosted the share of agricultural land being used to grow food crops; however, rising fossil fuel prices have also been a factor. The oil price shocks of the 1970s--and, in particular, the second round of price rises at the end of the decade--led to a fuel change in the ylang-ylang industry,with many distillers switching from prohibitively expensive petroleum products back to traditional biomass fuels. This development,together with expanded land clearing for food cultivation and the growing energy needs of the household sector, has contributed further to the disruption of the islands' fragile eco- system. The focus of this process has been the island of Anjouan, which accounts for some three-quarters of the country's total ylang-ylang production. The 45 tonnes of the essence produced on Anjouan in 1985 were supplied by the island's some 200 distilleries,most of which are artisanal-scaleplants equipped with 120 liter tanks. Although surveys have shown that a total of 199 distilleriesare in operation,only 13 of these plants actually pay the mandatory annual licence fee, at present CP 25,000. With the exception of a few small plants, the distilleries meet their energy nee s with wood and woody biomass. The smaller plants use approximately5 m of fuel to produce some 3 liters of essence. Th larger operations are more energy efficient and require only about 4 mi to distill the same quantity. This means that in 1985, between 60,000- 70,000 m of wood and woody biomass were consumed on Anjouan alone by ylang-ylangdistilleries, with aggregatecqnsumption on the three islands amounting to between 80,000 and 90,000 m Table 2.4 illustrates the economics of ylang-ylangproduction from the point of view of a typical small-scaledistiller. - 19 -

Table 2.4: COST STRUCTRE OF YLANG-YLANGDISTILLATION (CF)

Costs Revenue

Flowers 9,600 12,000 for 1 kg of premium 120 kg x CF 80 quality essence

8,000 for 1.8 kg of second- and third-rateessence

Labour costs 2,500

Biomass 5 m3 3,500

Depreciationof equipmenta/ 1,650

Licence fees b/ (25,000p.a., 625 per batch) 625 17,850 20,000

Net profit: betweenCF 2,000 and 3,000

a/ The Investment costs of a sIalI-scale distillery are CFA 250,000, with depreciationover five years, I = 10% and 40 batches per year, yieldingCFA 1,650 per batch. b/ May or may not be paid. Source: Mission estimates.

2.18. The small distillers make only a modest profit, which would vanish if their biomass costs were not very low (CF 2/kg when purchased by the truckload) and the per-batch licence fee, negligible. At the macro level, the Comoros derived export revenues totallingCF 650 million from the export of ylang-ylang essence it 1985. Production of this output involved the combustion of 80,000 m' (approx. 25,000 tonnes) of wood and woody biomass having a calorific value of 8,750 toe and repre- senting aggregate fuel costs of CF 50 million at current wood prices, which is equivalent to less than 1OXof the resultingexport revenues.

2.19. The feasibilityof substitutinganthracite coal for biomass is currentlybeing discussed. Interest in this option has been spurred by a series of field trials recently conductedby Societ6 Bambao. Assuming a 100% increase in end-use energy efficiency (from 15% to 30%), substitu- tion of the industry'stotal biomass demand would require the import of 6,250 tonnes of coal. According to data provided by Bambao, coal imported from South Africa (7,000 kcal/kg) could be supplied at a price of CF 40,000/ton, c.i.f. Anjouan. However, if such coal were utilized, 45% of gross revenues would go to cover fuel costs alone, and it is - 20 -

fairly obvious that this particular substitutionoption would force many distilleries to close--in particular the artisanal-scale operations. From the standpoint of the average individual ylang-ylangdistiller, a fuel switch to coal would not make economic sense unless biomass costs rose sharply to at least CF 8/kg, in which case the profitability of ylang-ylang distillation would be seriously in question. Solar preheating of water for distillation also appears to be uneconomic because most of the fuel is needed to vaporize the water, which cannot be done with solar energy (see Annex 1.2).

Lime Production

2.20. Lime is produced by burning coral with large tree trunks. This process is highly wasteful of energy. However, insofar as coconut trunks are used as fuel, this practice is not dangerous to the biomass system, as there is an excess supply of coconut trunks. The destructionof the coral reef, however, is ecologicallydamaging and should ba stopped. The lack of competitionamong the country's few importersand the resulting high margins make cemenitimported from nearby Mombasa--thesubstitute for locally produced lime--very expensive. Consequently, many Comorians still obtain their supplies of clinker by destroying the local coral reefs and trees. Ecologicaldamage to the coral reef should be reduced by freer imports of cement and a greater number of importers (to lower trade margins) so as to reduce demand for home-made lime. Lime calcination should be made illegal after implementationof the import liberalizationmeasures describedabove.

Charcoal

2.21. Charcoal productionwas not initiatedin the Comoros until the early 1960s, and the local charcoal industry is centered around the village of M'Kazi. The carbonization technology was imported from Madagascar and is comparable in all essential respects to the earth-mound kilns prevalent in Africa. 11/ The country's more than 100 full and part-time charcoal-burnersare not licensed or controlled in any way by

11/ The wood is stacked horizontallyand covered with a layer of leaves and soil. The ignition hole is positionedso as to face the prevailing wind direction. The charcoal burners use relativelywet wood having a moisture content of approx. 40% (wet basis). The locally availablehardwood species make a relativelygood carboniza- tion feedstock. If at all possible, however, the Comorian charcoal burners prefer not to mix wood from different species when charging their kilns. Including construction of the kiln, the entire carbonizationcycle lists between seven and nine days for smaller- capacity kilns (4-5 m ) and up to three weeks for larger kilns (up to 16 m ). The weight-basedconversion efficiency for wood with a moisture content of approx. 40% (wet basis) is less than 10%. - 21 -

the authoritiesand, for all practical purposes,have unlimited access to local hardwoods, which are preferred for carbonization. The charcoal makers and the country's operators are free to "mine" what is left of the island'snatural forest. Neither group pays any share of the social costs of continued forest depletion, to which both contribute directly.

2.22. Charcoal production exacerbates existing environmental problems. However, charcoal production is minimal with only about 40 tonnes of charcoal produced in the country annually, even though the charcoal trade is a relatively lucrative business. The retail price of CF 125/kg--whichconsumers purchasing somewhat larger amounts (> 5 kg) currently pay in Moroni--would probably be sufficient to cover all charcoal production and distribution costs, plus the cost of replacing the carbonizedwood as well. If hypotheticalfuelwood replacementcost3 of CF 8/kg (approximately US$26/t) are assumed--and this figure is roughly equivalent to the long-run production costs of plantation-grown wood in comparable countries--then the fuelwood equivalent of 1 kg of charcoal would cost approximately CF 80 (earth-mound kiln efficiency: lOX). In this case, the gross profit margin for the charcoal-burners-- most of whom also handle the marketing of the fuel (retail sales via family members)--wouldstill be substantial. Hence, since local people only produce charcoal sporadically,and in small quantities, the market is probably demand-constrained. Charcoal, a relatively expensive fuel, is purchased regularly only by more affluent consumers and a few commercialusers such as hotels and goldsmiths,who use it as a fuel for smelting and casting. Most Comorians buy charcoal only on certain occasions and for certain specific cooking tasks. Moreover, since charcoal'spotential transport cost advantage vis-A-visfuelwood does not come into play in the Comoros owing to the short distances between producers and consumers--15km at most--it is unlikelv chat the charcoal market will expand significantlyover the next few years. Since charcoal contains about twice the heat of firewood and its conversion is about twice as efficient, while conversion from wood to charcoal yields about lOZ by weight, using charcoal rather than wood (directly) would require 2.5 times as much wood. Even if kiln efficiency could be doubled, it would still take 7.25 times as much wood (via charcoal) to obtain any given amount of useful energy. Therefore, the potentialcontribution of charcoal to the satisfactionof the householdenergy needs of the Comoros is limited, especiallybecause biomass is in limited supplv and distances are short. A program to increase charcoal kiln efficiency should, however, be considered. The objective of the program should be to double kiln efficiency and see whether increasedsupplies result in lower prices (a decline of 25Z-30X would be needed to make charcoal competitivewith fuelwood or kerosene).If charcoal consumptionwere to rise significantly as a consequence, access to forests would have to be effectively restricted and charcoal production would have to become based on dedicatedplantations as soon as possible. - 22 -

BiomassGasification

2.23. EEDC intends to install a 40 kW biomass gasifier for elec- tricity supply on the island of Moheli in 1987. The plant has been donated by the European Development Fund (FED) in the framework of a "Programmede Developpementdes Energies Renouvelablesdans les Pays du Sud-Ouest de l'Qc4an Indien." The French-madegasifier is consideredto be well field-testedand is equipped with an efficient gas purification bystem. The plant runs on a mixture of coconut husks (752) and shells (25X). The feedstock must undergo a relatively labor-intensive preparation process and must have a moisture content lower than 202. Although the economics of biomass gasification for electricity supply appear shaky, the Comorian authorities should consider replacing the gasifier by a type presently being tested in Cote d'Ivoire which is more flexible in its fuel specifications. During the day (8 a.m.-6 p.m.) the gasifier generating station would supply power to the -Djoezi grid.

2.24. There are a number of problems which have yet to be resolved: for example, it will be impossibleto connect the unit to the rather long 20 kV transmission line without a synchronizer (which has not yet been purchased), and no procedures exist (or are planned) for disposing of 15 liters of highly toxic phenolic liquid waste which the plant will generate daily. Under favorable assumptions on production costs and effectivedemand for electricity,tentative mission calculationsshow the plant not quite covering operating costs (ignoring capital costs) and fuel (Annex 1.3). If the biomass gasifier project proceeds,the Comorian authorities should approach the donor to obtain a synchronizer,other needed capital items, and assistancefor disposingof the toxic waste.

2.25. Strict economic calculationsfor the projected gas5fier-based system on Moheli show a limited scope for utilizing this technology. The annuitized investment costs for the gasifier plant are considerably higher (five times) than those of a diesel generating set, the competing conventional technology. Electricity supply using a biomass gasifier might, for example, make economic sense at a large coconut plantation with centralized processing facilities where both shells and husks are accumulated as a waste product which has no economic value and whose disposal might involve monetary costs--assumingthat the gasifier system in question is technicallyviable and that there is effective demand for electricity. But on the island of Moheli, these conditions are not met and the gasifier option is not economic.

Other Renewable Energies

2.26. Wind Energy. The available data for Moroni indicate a mean annual windspeed of 3.1 m/s, which means that, in terms of primary energy availability,it would in principle be possible to utilize windpumps for drinking water supply. However, owing to the depth of the local boreholes (30-80 m) and the annual fluctuationsin the wind regime, wind - 23 -

powered water pumping is, for all practical purposes, not feasible. In 1985, tio Kenyan "Kijito" windpumpswere installedon Grande Comore, one at a site on the eastern shore of the island and one on the northern shore (pumping heads: 30 and 40 m, respectively),and neither has proved capable of delivering the water output it was intended to supply. Nor is the ut.lization of wind-powered generators for electricity supply a feasible option in the Comoros; such units require annual average windspeedsof at least 6 mis.

2.27. Solar Energy* There is little scope for the use of photo- voltaic (PVy systemsin the Comoros. To date, operational experience with the technology has been limited to a school lighting application (the system was donated and installedby a Belgian expatriateexpert) and the utilization of 550 W PV pumps at a few improved distillerieswhich were set up in the framework of a United Nations Industrial Development Organization(UNIDO) project. The average solar radiation level in the Comoros has never been measured. However, based on World Meteorological Organization (WMO) world maps indicating relative global radiation levels, it can be assumed that the minimum monthly average of daily global radiation is only about 4 kWh/m2/day. Even during the dry season, the skies are frequently overcast in the islands. Moreover, the high ambient temperatures reduce the system efficiency of PV technologies. Technically,it would be possible to employ photovoltaic(PV) drinking water pumps in the Comoros, above all in the eastern part of Grande Comore, which is not connected to the grid. However, in view of the depth of local wells, the high water outputs required, and the area's relatively unfavorable solar energy supply conditions,very large solar cell arrayi would have to be installed, which in turn would push investment costs so high that diesel pumps would be a more economical water-liftingoption (Annex 1.4).

2.28. Conditions are somewhat more favorable for the utilization of solar-thermalsystems. Although their range of applicationswould be limited, there is probably a small potential market for such devices, given the high price of electricity in the Comoros. Hotels, in particular, could be induced to switch from electric water heaters to simple solar water-heatingdevices (bread boxes). These devices should be imported as local artisans would probably not be able to produce them to the high technicalstandards required.

Future Biomass Consumption

2.29. Total consumption of fuelwood 10 years hence is estimated to rise by about 8Z to 468,000 m3 in 1995, as compa-ed to 433,000 m in 1985. This projectionbased on the followingassumptions:

(a) a populationgrowth of 3%/year; - 24 -

(b) a per capita fuelwood consumptionrate in the rural households in 1995 at the level of 1985 (estimated by the Mission at 0.8 m3/year), in view of the progressive depletion and more difficultaccess to the forestry resource base;

(c) a switch to improved stoves--resultingin an efficiencygain of 100%--and to kerosene by urban households,as a result of the measures recommendedin paras. 2.13-2.15;

(d) a gain in energy efficiency of 100% in the distillation of ylang-ylang (see Annex 1.2) and a 1995 output 25% higher than in 1985;

(e) a production of copra in 1995 at the level of 1985 as a result of a depressedmarket and aging coconut plantations;and

(f) all other firewooduses remainingconstant per capita.

2.30. Even if this projection is realized, energy conservation measures will not suffice by themselves to equilibrate supply and demand. Furthermore,the supply-demand situations vary from island to island. The deficit of fuelwood will be more deeply felt in Ar-jouanthan in the two other islands. Therefore, in addition to energy conservation measures, fuel substitution,agroforestry, and energy plantationsmust be considered to solve the problem. These actions are described more fully in the followingparagraphs.

Recommendations

2.31. The seriousnessof the deforestationproblem makes early action imperative,especially on the island of Anjouan. Addressing the problem will require a series of policy measures, includingland use regulations, energy pricingmeasures, tree planting,and improved stoves programs.

2.32. First, there is a need to develop and enforce a proper land use policy to ensure that the best use is being made of available land. This may require that clearing of land for the cultivationof foodstuffs such as rice or maize be kept to an absolute minimum, or that food crops continue to be interplantedwith tree crops as was done traditionally. An expansion of the area under field crops will do little to reduce the country's food import requirementsbut will have a substantialnegative impact on the biomass system and on the ecologi-al balance (especially erosion and rapid run-off,which would lower the water table). The donor community, in addition to continuing its support of the ongoing planting activities,can assist in preparingand financinga policy and incentives package aiming at encouraging the Anjouan population to plant multi- purpose species, and to diversify its cash crops rather than olanting rice and maize. - 25 -

2.33. Steps should also be taken to increase the sustainablesupply of fuelwood. In Grande Comore, all the conditionswhich are necessary to make energy cropping economically viable are fulfilled. Verified rainfall, soil properties,and recent past experience show that sustain- able yields in fuelwood plantations(10 m3/ha/year) are four times higher than in primary and secondary forests (2.5 m /ha/year). Without taking the cost of land into account, the LRMC of producing fuelwood in plantationswould be approximatelyCF 8/kg. Present market prices are clearly higher so that a plantation could be competitive. However, if prime crop land, which is in short supply, were to be used for fuelwood plantation, economic feasibility would be doubtful; replanting efforts should therefore focus principallyon marginal land. If farmers can be persuaded to plant, it is also possible that private agroforestrycould be more economic than public plantations. The mission recommends a detailed examination of the economics of various alternatives for increasingfuelwood supplies on Grande Comore.

2.34. On the demand side, steps must be taken to induce both the distilleries and major groups within the general population to adopt energy conservationmeasures. Wood traders who supply the distilleries should no longer be allowed free access to forest resources, wood consumption should be regularly monitored at all plants, and the authorities should see to it that all distillers pay the mandatory license fee. Distillerieswould thus have an incentive to improve their fuel efficiencyand the quality of their output, thereby increasingtheir revenues (see Annex 1.2). A side-effectof these measures would be to force the marginal producers out of business and to achieve a gradual concentrationof productioncapacity.

2.35. The introductionof improved stoves in urban areas and in the island of Anjouan also merits high priority,and a program to promote and distribute them should be initiated as soon as possible. One-pot metal stoves could be built by the same local artisans who currently produce the ylang-ylang distilleries and be sold for between CF 2,000 and CF 2,500 (see Annex 1.1). Their technical lifetime would be one to two years. Thus, for an urban family that uses approximately5 kg of wood per day, an improved stove would have a payback period of about six weeks, and the household's annual expendituresfor cooking energy would decline by around CF 18,000. The merits of investing in a stove would, however, have to be extolled through a public education campaign. In rural areas as well, an improved stove capable of reducing by more than half the considerablenon-monetary costs of domestic energy supply (the labor input for fuelwood gathering) might be socially accepted, and its dissemination could help reduce the pressure on the country's biomass system in the short-to-mediumterm. Additional data will need to be collected when the improved stoves project is prepared and a system to monitor stove acceptance and actual fuel savings would have to be established.

2.36. Even if every urban household were equipped with an improved stove, it would be unrealisticto expect an immediatesubstantial drop in - 26 -

biomass consumption. Disseminationon this scale would probably trigger adjustmentprocesses on both the demand and the supply side whose overall effect would be to limit the stoves' impact on aggregate fuelwood consumption. On the demand side, there could even be a rise in biomass energy use owing to the drop in fuelwood prices, while on the supply side, wood traders might increase deliveries to the market in an attempt to maintain their income levels.

2.37. In the long run, the substantial gains achieved through improved stoves would need to be supported by other measures because continued population growth, barring a shift in household cooking patterns, would continue to place growing pressure on biomass resources. Thus, in addition to the introduction of agro-forestry practices, the long-run strategy should consider large-scale fuel substitutionin the household sector from biomass to fossil fuels--above all kerosene--especially in Anjouan. The mission has therefore recommended as part of an overall review of petroleum product pricing policy a somewhat lower tax on kerosene (para. 3.7) than on other products. - 27 -

III. ISSUES IN THE PETROLEUMSUPPLY AND DISTRIBUTION SUBSECTOR

Introductionand Background

3.1. There are three main issues in this subsector. The first issue concerns the pricing of petroleum products after the recent decline in world prices and raises the issue of the sharing of benefits of this price decline. The second issue concerns the management of SCH--the petroleum import and distributionparastatal--and, more specifically,its investmentprogram. The third issue concerns the adequacy of procurement and supply arrangements (price, freight, reliability) which can be improved somewhat,but for which, in general terms, SCH deserves credit.

3.2. Consumption of petroleum products in the early and mid-1980s averaged about 14,000 tonnes per annum, or about 35 kg per capita, which is low even by the standards of similar low-income countries (Annex 2.1). No clear trend is visible with annual consumption oscillating about the average. Grande Comore accounts for 80% of the country's consumptionof petroleumproducts.

Pricing of PetroleumProducts

3.3. Petroleum products in the Comoros are expensive in comparison to world prices. 12/ Prices reflect high transport costs, high costs of domestic distribution(a small market split into three islands),and high operating costs of SCH. Not surprisingly,as a result, consumptionhas stagnated over the past 3-4 years, except for a variable portion dependent on construction of civil works financed with external assistance.

Taxation Policy

3.4. Present oil product taxation is as follows:

(a) an ad valorem customs duty is imposed on the c.i.f. price (gasoline,41%; diesel, 21%; kero, 30%; jetkero, 0%);

(b) a specific turnover tax is charged (CF 10/liter for gasoline; CF 8/liter for diesel; CF 8.6/literfor householdkerosene; and CF 0/liter for jet kero); and

(c) a specific levy for road maintenance is assessed on transport fuels (CF 13/liter for gasoline,CF 15/liter for diesel).

The table below shows how the above taxation policy affected the price build-up of petroleumproducts.

12/ Gasoline is sold at CF 275.7/liter (US$0.836); diesel oil at CF 180/liter(US$0.546); and kerosene at CF 200/liter(US$0.606). - 28 -

Table 3.1: COMOROS:1986 PETROLEUMPRODUCTS PRICES BUILD-UP (CF/LIter)

Household Jet Gasoline Gasoll Kerosene Kerosene

C.I.F. Costs 42.0 39.0 39.0 39.0 SCH Costs 23.2 23.6 24.8 24.8 Subtotal 1 65.2 62.6 63.8 63.8

Taxes -CustomsDuty 17.2 8.2 11.7 -TurnoverTax (specific) 10.0 8.0 8.6 92.4 78.8 84.1 63.8

Road user charge 13.0 15.0 - - Subtotal2 105.4 93.8 84.1 63.8

Present SellingPrices 275.7 180.0 200.0 190.0 Net Margin to SCH 170.3 86.2 115.9 126.2

GovernmentRevenue (CF/liter) 40.2 31.2 20.3 -

GovernmentRevenue in 1985 (beforeprice decline) 66.0 45.5 43.1 -

Note: SCH costs are known only approximately. Above figures suggestthat costs are probablybetween CF 20 and CF 30/liter. Source: SCH, CustomsDirectorate, mission estimates,and computations.

3.5. In the aftermath of the decline in oil prices, this system of taxation has produced the followingresults:

(a) c.i.f. costs fell more than 60Z;

(b) absolute government revenue declined by about 351 per liter; and

(c) taxes as a percentage of c.i.f costs (which fell nearly 60X) rose 30Z-100%, reflecting the increased weight of specific taxes.

The benefits of this price decline have accrued to SCH. SCH profits for 1986 are not yet known, but they are expected to be in the range of CF 1-2 billion. To appropriate some of the benefits of the fall in oil prices for the Treasury, a temporary income surtax for the 1986 should be assessed to capture these windfalls. Al.2rnatively,as sole owner of SCH, the Government could declare an extraordinarydividend of the appropriateamount. - 29 -

3.6. Over the longer run, there is a need to create a more flexible pricing structure. The present pricing policy evolved in an era of steadily rising petroleum prices. This policy was designed to cover coste and leave a small profit (typicallyaccruing on gasoline) to cover the costs of SCH and, possibly, provide a small return to the public capital invested in SCH assets. Typically, prices were increased only when SCH margins came under excessive pressure. At present, greatly reduced import costs in the face of unchanged high domestic prices have createdand will continue to cause a sizeable surplus for SCH.

3.7. Several elements should be taken into account in reexamining petroleumproduct price policy:

(a) Since most observersagree that prices will probably not return to 1980-84 levels for some time, it would seem appropriate to review the sharing of the benefits of lower world oil prices (and the costs of higher oil prices once they rise again) between SCH, the Treasury, and consumers. Setting prices at current economic costs of supply would shift benefits mostly to consumers (which is not considered entirely appropriate, see below).

(b) Second, the public Treasury needs substantialrevenues and the taxing of petroleum products is one of very few opportunities for increasingpublic revenues.

(c) Third, prices should reflect economic costs of supply (and close substitutesshould not have very different prices). How- ever, in some well-founded cases, variations in tax and tax- like levies should be used to help serve some social goals 13/ (e.g., taxes on kerosene could be moderated to help especially urban consumers substitute away from woodfuels; similarly, tax policy should ensure that EEDC is not unduly burdened by taxes on diesel).

(d) Fourth, since SCH has no experience in managing large amounts of funds it should not accumulate more than it needs for immediate small investment and for writing off doubtful assets (receivables)which should be removed from the balance sheet. In addition, the accumulationof funds might foster increased low-priorityexpenditures by SCH.

(e) Finally, although the CF is convertible, the Comoros suffer from a structural imbalance in their external accounts. It would be unwise, through lax petroleumpricing, to inordinately encourage consumption of imported petroleum products while basic necessitiesare scarce and expensive.

13/ In this case, a partial tax remission on household kerosene and diesel for power generation would still leave a substantialamount accruing as taxes to the Government. - 30 -

3.8. For these reasons, it is recommended that a specific levy be imposed on petroleum products. This will permit adjustments in the levels of petroleum product prices, while also ensuring that public revenues accrue at the time when products are imported. Otherwise, the Treasury will have to wait until accounts are completed(typically a year after the close of the year) before it can tax SCH profits. In addition, the system of quarterly advance income tax payments should be modified (advance payments are based on last completed year, i.e., 1985 when profits were much lower than in 1986 or 1987).

Pricing of Specific Products

3.9. While past pricing policy has generally been adequate in that (more than) full costs have been transferred to consumers, the relative prices of products have not always had a consistent structure. For example, gasoline is taxed more heavily and is subject to a much higher margin than other products. Although c.i.f. costs of gasoline and diesel are close, the final selling price of gasoline is 153Z that of diesel. The rate of customs duties varies from 0% (on jet kerosene) to 41% (on gasoline) and thus finai selling prices as a proportion of c.i.f. cost also vary widely.

3.10. A more logical pricing/tax structure should seek to tax at similar rates. For example, the tariff rate could be set at 30-40X for all products (i.e., including jet kerosene which is currently untaxed). The road levy should be equal or, as is the case now, higher on diesel than on gasoline because diesel vehicles (often trucks) damage roads more than cars. Automotive fuels sold tax-free should also pay the road levy. On a more detailed level, the handling of jet kerosene costs more than that of normal household kerosene, and therefore,the price of jet kero should be higher (not lower) than kerosene for household uses (cook- ing, lighting). Similarly, bulk sales of diesel oil to EEDC cost less than other sales and should be priced accordingly.

3.11. Using the broad principles mentioned in the preceding paragraphs,an illustrativecalculation is shown below. Of course, there could be many variationswhich the Comorian authoritiescould choose. - 31 -

Table 3,2: ILLUSTRATIVEPRICE 9iUILD-UPFOR PETROLEUMPROiUCTS (CF/iiter)

Diesel Household Jet Gasollns Diesel to EEiC Kero Kero

C.I.F. 42. 39. 39. 39. 39. US conts/liter 12.73 11.82 11.82 11.82 11.82 SCH Costs 30. 30. 15. 15. 30. Subtotal 72. 69. 54. 54. 69. Tariff (35% of c.i.f.) 15. 14. 14. 14. 14. Turnover (Sales)Tax 10. 10. 10. 10. 10. Road Levy 15. 15. Subtotal 112. 108. 78. 78. 93. Exceptional(windfall) Levy 8/ 100. 100. 100. 100. 100. SCi "Normal"Profit (20% of c.i.f.) 8. 8.0 8.0 8.0 8.0 HypotheticalSelling Price 220. 216. 186. 186. 201. Tax remission (-) C-) (50.) (50.) t-)

Hypothetical(final) SellingPrices 220. 216. 136. 136. 201. US Cents/liter 66.67 65.45 41.21 41.21 60.91 Governmentrevenues 140. 139. 74. 74. 124.

Memo Items Economiccosts (c.i.f.+ SCH costs)b/ 80. 77. - - 77. Present (actual)selling price 275.7 180. 142. 200. 190. In US Cents/liter 83.55 54.55 43.03 60.61 57.58

a/ This levy could vary In responseto changes In c.l.f. prices. b/ Since SCH costs are not known precisely, the above figure should be taken with caution;figures between CF 80 and CF 90/literappear reasonableand have been used In economiccalculations. Source: SCH and mission computationsand estimates.

3.12. Under this policy, Governmentrevenues would be protected (they are substantiallyhigher than before the price fall) and SCH profits would now be rather modest so that the Treasury would only get a small amount through the profits tax. These hypotheticalprices would allow most of the benefit of falling oil prices to be shared by consumers,SCH, EEDC, and Government. For social and political reasons, the Government might choose to tax some products less heavily (thereby sharing the price decline with consumers of these products). For example, the table shows a CF 50/liter tax remission on kerosene for household use and diesel for power generation. While these numbers are illustrative,they fall within the range of reasonable,plausible values. - 32 -

3.13. A pricing stricture like the one illustratedin Table 3.2 has several advantages:

(a) Government revenues accrue gradually and predictably over the year (rather than one year after closing the books) at a substantiallyhigher level than before the price fall.

(b) The prices of gasoline and diesel are much closer (as they are close substitutes) and will not unduly influence choices between gasoline and diesel powered vehicles,motors, etc.

(c) Lower prices can be given to all consumers (includingEEDC and consumers of household kerosene) without any sacrifice in public revenues.

(d) SCH costs would be covered (they are shown as costs and built into selling prices) although its profits would fall somewhat (from about CF 200 million in 1985 to about CF 150 million in 1986, if this pricing policy had been applied). The Government could always choose to let SCH accumulate larger profits by reducing some of the levies or reducing the income tax.

(e) Prices would need to be maintained in real terms (e.g., by offsettinginflation, exchange rate movements,and world market price changes for the products).

SCH Managementand InvestmentProgram

3.14. Establishedin 1981, SCH is about to leave behind the financial problems which plagued it since its establishment. Preliminary calculations suggest that 1986 profits will be in the CF 1-2 billion range. This will allow SCH to finance some of its prio.ity investments, improve its balance sheet, and make important contributionsto public revenues. Tax aspects of SCH supervisionwere discussedearlier.

3.15. SCH management has been improving gradually since 1984, especially with respect to operating procedures and accounting. Efforts currently underway at SCH to improve the management information system will, hopefully, bear fruit soon and allow SCH to establish better overall management (greater awareness of costs) and allow more accurate and timely financialsupervision by the Ministry of Finance.

3.16. The recent large investments(a petroleum products terminal and tarnkfarm) already carried out in Mutsamudu and programmedfor Moroni and Moheli will definitelyput strains on SCH's ability to manage and operate its facilities at a reasonable level of efficiency. The Mutsamudu petroleum terminal is overdesignedand will be underutilized for many years to come. The idea of purchasing a small tanker vessel to move products between Mutsamuduand the other islands should be rejected: the tanker would be underutilized,it would be difficult to operate without - 33 -

experiencedpersonnel, and would cause high product losses in loading and unloading.

3.17. Investments in storage capacity in Moroni should be limited because existing facilitiesare basicallyadequate and balanced. Highest priority should go to renovationof the sea-line (with one or two eight- inch pipes but no jetty, only a floating mooring). A second tank for kerosene (to keep it separate from jetkero) might also be useful. 14/ A UNIDO proposal to build two new 1,500 m3 tanks should be carefully screened because its economic justification is marginal. Although no cost data have been made available, such an investmen would cost at least CF 250 million (US$750,000). In order for this investment to be justified, substantial freight savings would have to accrue. In order for this to be possible, additional investmentin discharging facilities would also b3aveto be undertaken 15/ and it is not certain that shipments of 7,000 m3 would incur substantiallylower freight rates than shipments of 3,500 m3 (especiallysince each shipmert consists of three products).

3.18. The investments considered for Moh6li should not be carried v t. Investing CF 1.2 billion (US$3.6 million) in facilitiescannot be -tiied when total annual petroleum product consumption is only 460 m . 16/ The reliability of supply in Moheli can be improved with better planning and scheduling of deliveries and with minor capital improvementson the island itself. Most notably, a rehabilitationof the service station in Fomboni appears fully justified, as is the purchase and installation of electric pumps to transfer products from beached dhows or other crafts to the service station tanks or to truck mounted tanks. If necessary,a small increase in storage capacity either at the service station or on the premises of a major consumer (EEDC, 17/ Public Works) could also be considered. The purchase of some skid-mountedtanks

14/ One of the two existing 800 m3 tanks which are scheduled for demolition should be repaired and recommissioned. If this is not possible, a new tank should be built. Even if only one quality of kerosene continued to be imported, one tank could be used for the substandardjet kerosene that is used as household fuel.

15/ Demurrage fees would quickly offset any freight savings if discharging facilities were insufficient. The discharging rate should be at least 200 m3 /hour, or demurrageswill be unavoidable.

16/ At present prices, 460 m3 of products are worth CF 18.4 million (or US$56,000); at most, freight savings could amount to CF 1.0/liter (or CF 0.46 million = US$1,400) which could not justify an investmentof US$3.6 million.

17/ EEDC has two 20 m3 storage tanks for gas oil. One could be used as a reserve for the island, as EEDC uses only 9 m3 per month for power generation in Moheli. - 34 -

(of a few cubic meters each) or of heavy duty barrels could also be considered. In sum, substantial improvements in petroleum supply on Mohili could be obtained for a total investment not exceeding CF 65 million (US$200,000).

SuggestedInvestment Program for SCH

3.19. Investments which are required for SCH to improve its operationsare listed below:

(a) Replacement of sea line in Moroni (following inspection to determineactual state of existing one). Approximate cost (2 X 8" lines) : CF 330 million (US$1 million).

(b) Repair or building of additiogal tank for separatingkerosene from jet kerosene (800-1,000m ). Approximatecost (new tank) : CF 100 million (US$300,000).

(c) Building of retention basin, drainage and decantation facilitiesin Moroni. ApproximateCost : CF 65 million (US$200,000).

(d) Improvement in petroleum products supply for Moheli (rehabilitationof service station, purchase of skid-mounted tanks, elect.ic pumps, and heavy-dutydrums). ApproximateCost : CF 65 million (US$200,000).

(e) Of lower priority, but if justified by freight savings (seems improbable),building of 2 x 1,500 m3 tanks at Moroni. Approximate Cost : CF 250 million (US$750,000). Also, investigatingthe possibilityof having larger vessels (7,000- 8,000 DWT) moor off the Mutsamudu terminal in order to realize freight savings (see para 3.17).

(f) Of still lower priority, but of some importance, is the provision of facilitiesfor refuelingof foreign aircraft. Any capital investmentsshould be financed by the beneficiariesand the prices of fuel should cover all operating costs. The Comoros should not take any risks in connection with an activity which is of no direct benefit to the Comoros.

The investmentsdiscussed in the previous paragraphs are at an advanced stage of preparation or are being carried out. Financial packages have been approved by donors but not all have yet been signed by the Government. SCH has made efforts to downscale investmentsproposed - 35 -

for Moheli and the airport at Hahaya. However, investmentscould still be reduced further (from a total of US$4.3 million, including US$0.3 million financed by SCH). Savings from scaling down investmentsshould result in lower borrowings (rather than using these savings for other expendituresas it frequentlyhappens in the Comoros).

Adequacy of Procurementand Suppl Arrangements

3.20. SCH has succeeded in assuring a relatively reliable and continuous supply of petroleum produts to the Comoros. Given that the Comoros is a small market split over three islands, the costs of assuring this supply are bound to be high. The contract with the Kuwait Petroleum Corporation (KPC) (which was not made available) is apparently set for several years but renegotiatedevery year. SCH apparently does not know the breakdown between the cost and freight elements. 18/ Rough calculationsby the mission suggest that cost is based on the spot price in the Gulf (plus some premium) plus a freight cost of US$45-60/tonne. 19/

3.21. While c.i.f. costs appear high, the small tonnages purchased by the Comoros are of little interest to major traders or oil companies. These small tonnages would also be insufficientto justify the creation of an experiencedprocurement department at SCH. Small savings in costs could easily be swamped by demurragecosts or "first aid" resupply in the case of supply disruptions.

3.22. Seen in this light, the contract with the KPC appears to be a suitable vehicle for supplyingthe needs of the Comoros. While the basis on which the prices are set is not clear, KPC is a competitivesupplier in the area. However, some elements of the contract could be improved. The mission recommends that SCH discuss with KPC revised arrangementsunder which the price to be contracted should be a c.i.f. price resulting from the combinationof an f.o.b. product cost, equal to Platt's quotations of the Bill of Lading date for cargoes f.o.b. Arab Gulf, plus insurance,and a fixed freight element. This freight element could be adjusted by mutual agreement to significantmarket variations and should not depend on the size of the vessel transportingthe product. This will force the seller to shop around to gel the best possible

18/ This seems difficult to understand, since freight rates vary by shipment and thus only the cost (of products) element can be known with certainty.

19/ While these rates appear high, in Sao Tome a similar level of imports (but from a closer source) incurred freight of between US$27 and US$41/tonne. - 36 -

freight rate and not to accept the first ofrer of any vessel available, which may be the current practice and the reason for the high freight rate mentioned.

3.23. For the volumes under consideration--18,500tonnes in 1990-- split into three products, it is also firmly recommended that SCH continue to use one year supply contracts with a reliable supplier. The KPC is usually a reliable and competitive supplier. But in order to strengthen its hand in negotiations,SCH could also (in addition to the measures suggested in the previous paragraph) open a tender and invite some major oil companies or traders to bid, if only for comparison. The tender or contract should call for one year's supply, indicating the annual volumes with variation of plus or minus 10X at buyer's option for quarterly deliveries to be indicatedone month in advance and for one to two dischargeports at buyer's option.

3.24. In this manner, and with deliveries of 4,000-5,000tonnes of three products, the freight element would be minimized (possibly to as little as US$30/tonne). 20/ The possibility of grouping deliveries appears somewhat difficult: other ports are distant and the size of vessels serving them is too large to be easily accommodatedby Comorian installations.21/

3.25. In conclusion, SCH has performed a valuable service to the Comorian economy by assuring reliable supplies of all petroleum products (and lubricants). With some help from falling oil prices, SCH should now be able to strengthen its balance sheet (by eliminatingdoubtful assets which it inherited),make rapid and substantialcontributions to public revenues, and lower margirally the prices of some products. The mission recommendsthe Government and SCH take steps in two areas to improve the economic efficiency of petroleum product pricing in the Comoros and the cost of importingthese products to the economy. In conjunctionwith a revised price and tax structure,a small cut in the price of gasoline and domestic kerosene could be envisaged, as well as for gas oil sales to EEDC. On the other hand, gas oil for automobile use could rise somewhat in price, as could jet kerosene. As for supply options, the contract with KPC is a good instrument;it could, however, be improved to give KPC

20/ Information available was the c.i.f. cost only. The estimate of US$45-60/tonnefreight is based on the assumption that f.ob. cost is "spot Gulf," but it could easily be "spot Gulf + US$10."

21/ The Anjouan terminal could possibly be used by larger vessels. Flexible pipes would have to be attached to existing sea lines and ships could not berth--they would have to moor at a distance and discharge. While there are technical aspects which were not studied, one main obstacle is that the products are not needed in Anjouan and any savings in freight would be more than offset by costs of transshipppingto Grande Comore. - .51 -

treater incentiveto minimizefreight costs (para. 3.22). Given the volume,product, and islandneeds, a total of four annualdeliveries of 3,000-4,000tonnes are needed,two of which would also off-loadproducts at Mutsauudu. - 38 -

IV. ISSUES IN THE POWEMSUBSECTOR

Introduction

4.1. EEDC is responsible for electricity generation, transmission, and distribution in the three islands of Crande Comore, Anjouan, and hoheli, and for public water supply and distribution in Moroni, the capital of Grande Comore. The present organization of EEDC was established in July 1981, and the company is the successor of the previous Soci6t6 d'Electricite des Comores and the Public Water Services. Electricitysupply is based on diesel power plants except for an old mini-hydro plant in Anjouan (of 225 kW), whose present legal ownership is not clearly established. A relativelylarge MV distribution system exists in Grande Comore and smaller ones are in place in Anjouan and Moheli, each connectedto the main power plant. No plants operate in parallel,and small isolated systems exist in all islands.

4.2 Installed capacity in Grande Comore is 4.2 MW (of which 2.4 MW are firm) for a peak demand of 2.3 MW in December 1985. In Anjouan, installed capacity serving the interconnectedgrid around Mutsamudu is 1.07 MW, but it is derated to about 0.62 MW for a peak demand of about 0.4 MW in late 1985. In Moheli, installedcapacity is about 0.55 MW for a peak of about 115 kW. In 1985, total generation amounted to 12.1 CWh, correspondingto a billed consumption of .7.7 GWh with losses and own consumptionaccounting for about 3.2 GWh or 27% of gross generation,and other unbilled consumptionamounting to 1.2 GWh. There are a total of 6,160 consumers, the great majority in the household sector. Average annual generation per capita in 1985 was 31 kWh in Grande Comore, 15 kWh in Anjouan, and 12 kih in Moheli.

ElectricityDemand Projectionsand InvestmentProgram

4.3 Little attentionwas given to expansion planningand investment activities in the restructuringof EEDC. In the first instance, this neglect manifested itself in a lack of concern about future demand. Most investment decisions were made without reference to a likely demand scenario or least-costexpansion plan.

Demand

4.4 The historical record of electricity consumption is short in the Comoros. Acceptable data series begin in 1981, but only data since 1983 were readily available. Between 1983 and 1985, gross electricity generation rose at an average annual rate of 14.5Z, from about 9 CWh to 12 GWh. Meanwhile, the number of consumers grew at 19.4% p.a. in Grande Comore and at 8.2% p.a. in Anjouan, which means that consumption per connectiondeclined in Grande Comore and stagnated in Anjouan. More than 95Z were residentialor commercialconsumers with very low load factors. - 39 -

4.5 At the end of 1985, household/commercialconnections accounted for 632 of electricity sales (73X in Anjouan, 83X in Moh6li, and 60X in Grande Comore); Government, 21X; and industry, 16Z. Also, 362 of gross generation (4.4 GWh) were "losses" (i.e., difference between gross generation and sales). 22/ Included in losses are: consumption of auxiliaries, technicaL losses, the free consumption allowance of EEDC employees (0.44 GWh), public lighting (0.4 GWh), pumping of water for Moroni (0.35 NWh), and theft. Present practices governing free consump- tion by EEDC employees and recovery of public lighting costs (flat surcharge of CF 5/kWh imposed on all consumers) should be reexamined in view of the substantial weight they have in total electricity consumption. A variety of demand projectionswere made to get a rough idea of needs and to sketch the outline of an expansion plan.

Table4.1: COMOROS: ALTERNATIVEELECTRICITY DE4AND PROJECTIONS

1985 SystemPeak GenerationRequirement GrossGeneration 1995 2000 1995 2000 (MWh) (W ------(MWh) ------GrandeComore 9,416 Base Case 4,75/ 5,366 18,336 20682 Low Case 3,812 4,128 14,692 15911 High Case 5,009 6,135 19,308 23646

Anjouan 2,400 Base Case 1,616 2,065 5,238 7236 Low Case 1,462 1,831 4,739 6416 High Case 2,012 2,568 6,521 8998

MbohiI 246 - - -

Source: Annex3.1. Note:Six caseswere calculated for G.C. and AnJouan.The base, low and highcases are summarizedIn thistable. Mohelilssituation is such that foreseeablerequirements over the next 7-8 yearscan be met fromexisting capacity.

These projections are based on modest economic growth estimates (3-4% p.a. GDP growth) and reasonable stability in the real price of electricity. Detailed assumptions and computations are shown in Annex 3.1. The following paragraphs present the outlines of a system

22/ Physical and technical losses ("true" losses) are difficult to estimate because of poor metering and the figures given in the text should be considered approximate. - 40 -

. expansionplan designed to meet the base case projectionof energy demand at least cost, given the informationavailable. Substantial postpone- ments of EEDC investmentsare proposed.

Existing InvestmentProgram

4.6 While no comprehensive generation and distribution program exists, an approximate program is implicit in the investment proposals currently being discussed/studiedby EEDC. The main investmentsin this program include: a fifth unit of 1.8 MW at Voidjou, a new diesel plant of 1.92 MW at Mutsamudu, and an 18 km, 20 kV line from Mutsamudu to Bambao. EEDC estimates the cost of this program at about CF 4.1 billion or US$12.4 million for the period 1987-95. This program is excessiveand very costly (investmentsmade far ahead of needs, high unit costs of plants and lines). This report recommendsa substantiallyreduced (or postponed)program which meets the needs for electricityprojected in the base case, at the same level of reliability and at significantlylower costs (para. 4.22).

Issues and Recommendations

4.7 EEDC faces an array of issues such as structurallyhigh costs because of unfavorable demand characteristics;low efficiencybecause of poorly trained manpower and poorly maintained plants and facilities;and poor finances because of high costs, high investments,and not entirely appropriate, although rather high, tariffs. These issues are inextricablyintertwined and, obviously, inefficientoperations lead to high costs, inappropriatetariffs help set wasteful consumptionpatterns, and poorly trained staff perform as best they can. But EEDC does in fact suffer from structurally high costs because the daily load curve is unfavorable (high, narrow peak) and, thus, large capacities must be maintained to serve this (lighting)peak. Even with greater operating efficiency, no dramatic cost reductions are possible without an improvementin the load factor (which can only happen in the long run). High depreciation charges are a result of this situation, and high financial charges are anticipated in the coming years as loans used to finance capacity become due. These issues are more systematically discussed below under three major headings:

(a) System ExpansionPlanning and Investment;

(b) ElectricityPricing and EEDC Finances;and

(c) Management (includingOperational Efficiency,Organization and Training). - 41 -

System Expansion Plans and InvestmentProgram

4.8 A comprehensive investment program for generation and distributionexpansion does not exist. Ad hoc, limited studies have been done by consultants in connection with specific projects, but with no overall system assessment. For its part, EEDC lacks the expertise to produce a comprehensive program of priority investments. Investment decisions have been taken on a short-termbasis, under differentkinds of pressures,not necessarilyby optimizingeconomic costs over the lifetime of the investment. The preparationof a least cost investment program, duly preceded by the collection and processing of detailed data on present system operating conditions and the establishment of demand projections should be carried out without delay, with outside technical assistance, and involving, as far as possible, local counterpartstaff. This program should give high priority to plant rehabilitationand life extension over new investment (paras. 4.11-15) and low priority to extending 20 kV networks (para. 4.14). Alternativesfor expansion are different in the three islands due to differentdevelopment levels, rates of urbanization,existing networks, and available resources. Investment issues in each of the three islandsare set out below.

4.9 Nevertheless, there are several investment issues that are common to all systems. First, the capital costs of some projects seem high by internationalstandards. For example, the quoted costs of medium speed diesel units of around US$1,150/kW are considerablyhigher than typical costs under similar conditions elsewhere,which are in the range of US$750-900/kW. Similarly, the costs of some 20 kV lines appear high, notably the proposed link between the Mutsamudu and Domoni systems in Anjouan (para. 4.19). High investment costs unnecessarily raise the costs of electricity supply and delay EEDC achieving financial viability. Worldwide experience with procurement under international competitivebidding has shown that a significantreduction in the cost of new facilities can be achieved. In the interest of lower electricity cost and of improving EEDC's financial performance, it is recommended that more competitive bidding procedures be used for all major procurement and that bids received be evaluated in a transparentmanner that would evaluate expected lifetime costs, where applicable (e.g., in diesel units).

Expansion Plan for Moheli

4.10 Of the country's three power generation/distributionsystems, the small system on Moheli is the one best endowed with installed capacity to cope with expected demand growth. The Fomboni plant has a capacity of 552 kW for a present peak demand (1985) of 115 kW. Assuming that recent growth rates are sustained,which is optimistic,demand would rise at 14.5X p.a. and the plant would be sufficientat least until 1995, provided the units receive adequate maintenance. No extension of the small MV network at 20 kV is justified in the short term. Possible - 42 -

candidates for further extension in the medium term are and M'Bats6. Their distance from the NV network is about 4 to 6 km, so that alternative options would be extending the system or installing local small diesel plants. In the coming years, the low income level of the population, the absence of potential industrialloads, and the expected low load factor would make the cost of the extension hardly recoverable. The increase in capacity of the Fomboni plant through a 40 kW biomass gasifier,running on a mixture of coconuthusks and shells, has also proved to be unattractivein economic and financial terms (see paras. 2.22-2.24and Annex 1.3).

ExpansionPlan for Grande Comore

4.11 In view of the present extension of the HV network in Grande Comore and the low load density, it is recommended that no further extensionsat 20 kV be built in the near future. Electrificationof new centers or increase in supply in inland centers not close to the MV system should be based on isolated units, taking advantage of rehabilitated sets (which are available in the Comoros). It is not recommended to pursue such electrificationintensely as those centers will become new sourcesof financiallosses, as are the existing isolated centers of M'Beni, ,and . The Development Plan 1983- 1986 issued by the Governmentprojected the extensionof the network both to the northeast and to the south, estimating its cost at CP 150 million. This estimate is outdated and the extensions are hardly justifiable. By the end of 1987, the structure of the NV network--with three long feeders coming out of the plant--will be such that further significantinvestments should not be required for several years.

4.12 At the generator level, the derating of units No. 1, 2, and 3 has left the system with no reserve margin. The rehabilitationof these units, No. 1, 2, and 3, estimated at CF 90 million, should receive priority. The installationof unit No. 5, with 1.8 MW, in 1988, will raise the firm capacity to 4.2 MW which is enough to meet demand (with reserve) until at least 1992. Depending on demand growth, new capacity will be required either in 1992 (Base Scenario),1991 (High Scenario),or 2000 (Low Scerario). The optimum capacity of the new unit shouLd be defined within the framework of the expansion plan, but it would be advantageous to install a third similar unit of 1.8 MW which would minimize spare parts inventory requirements. By 1993/94, 2.4 MW of the plant could require replacement(units would be 15 years old).

4.13 Second, the high capacity costs and the low load factor of the whole system which lead to peak losses that are both high and costly, togetherwith an unfavorablepower factor (para. 4.2), indicate an urgent need to reduce losses. Probably the most efficient means of reducing losses would be to install shunt capacitors for power factor correction. Installation of between 400-500 kVAR with investments ranging between US$8,000 and US$10,000 is probably justified. An alternative option for EEDC is to bill all MV consumers for their - 43 -

reactive energy consumption. Reduction in peak losses obtained through power factor correctionmay postpone by at least one year the need for a new generating unit, thereby saving substantially on capacity costs. Possible reconductoringof certain circuits should be examined, as well as improvementsin load assignment to distributiontransformers. It is recommendedthat EEDC commissiona loss reductionstudy that would, inter alia, examine these alternatives and prepare a plan of action for lowering system losses.

4.14 It has been assumed that unit No. 5 in Voidjou would be rated 1.8 MW due to present lack of reserve and requirementsof 730 kW from two new hotels after 1988. This option should be compared with a private diesel supply to the hotel in Mitsamiouli (required demand 600 kW) and reduction of the rating of the new unit to 1.2 MW by EEDC. This would allow EEDC to supply energy to the hotels during most of the day (between OhOO and 17hOO every day), while at the same time taking advantageof the system load diagram and significantlyimproving the load factor. Without the discontinuity caused by the hotels, system peak demand will not increase by more than 150 kW per year and a rating of 1.2 MW would be sufficient to meet increases in demand for 7-8 years, and would reduce the investmentby 33X (nearly US$0.7 million or CF 228 million). As the utility will be forced to invest from US$2.5-3.0 million in Anjouan to completely replace the Mutsamudu power plant (with no increase in sales), investments in Grande Comore should be limited to those which are absolutely necessary. It is recommendedthat EEDC compare the economics of installing a new 1.8 MW unit in Grande Comore with the option of installing a unit of 1.2 MW together with a captive 0.6 MW unit in the new hotel before deciding on the rating of the new unit and negotiating the selling price and tariff structure with the hotels. These recommendationsmay come too late, as guarantees may already have been given to the hotel. In that case, EEDC should receive immediate assistance to help it negotiate adequate tariffs for the hotel.

Expansion Plan for Anjouan

4.15 The first priority in the Anjouan system is the building of the new diesel plant in Mutsamudu. The age, maintenance, and operating conditions of the existing plant do not comply with minimum requirements of reliability and safety and are causing high operating costs. The present schedule calls for the two initial units to be commissionedby late 1988. The chosen rated power of 640 kW per unit implies that, due to present peak demand levels in Mutsamudu (650 kW), two units would be required to meet demand with acceptable reliability during peak periods. EEDC intends therefore to install all three units at the beginning to guarantee an adequate reserve margin. However, it is possible to delay the commissioningof the third unit until 1990-91 and use the existing plant as reserve margin or transfer one of its 300 kW units temporarily from the old plant to the new one, or to use the capacity of the Domoni plant as the reserve. - 44 -

4.16 The other short-term large investment in Anjouan is the 20 kV transmissionline to Domoni. The new line will be approximately18 km long and follow the right-of-wayof the old 5.5 kV line to Bambao. From this village on to Domoni, an 8 km line, insulated for 20 kV, is already in place. The chosen right-of-waywould allow the supply of some small industriesin Patsy, the electrificationof three rather close villages, Tsimbeou, Dindi, and Chandra, with an estimated joint population, in 1986, of 16,000 inhabitants,and the parallel operation of the plants of Mutsamudu and Domoni. At a later stage, the rehabilitatedhydro plants of Tatinga Superieure and Marahani could easily be connected to the line. The rehabilitationof the existing hydropower stations appears to be economically attractive and should be seriously considered by EEDC (see Annex 3.2) while the idea of building a large hydro plant (4 MW) at Tatinga has rightly been postponed because of the new plant being built in Mutsamuduwhich will meet future demand for a good many years. 23/

4.17 The possibility of taking advantage of some hydro resources in Anjouan is tied to the existence of a transmissionlink with adequate capacity to transmit the energy to the main load centers. The old 5.5 kV line between Patsy and Bambao cannot be economicallyrehabilitated. In the medium term, the proposed 20 kV link will be required,but the proper timing and sequence of construction,together with its investment costs, should be reassessed. The key policy issue in this case is to assess when the link will be attractive, which can only be done within the frameworkof a system expansionplan for Anjouan.

4.18 EEDC is not planning to operate the Mutsamudu and Domoni plants in parallel. The existing units at Domoni would simply remain as reserve in case of outage in the Mutsamudu-Domoniline, but the bulk supply of Domoni/Bambaowould come from Mutsamudu. This operating policy would prevent the connection of the hydro plants to the grid, thus eliminating any interest in thei rehabilitation Thiea 'oa-tingpc'lcy I - no optimal, especially in Anjouan, where the existence of hydro resources should undoubtedly lead to the operation of a multi-plant interconnected system. Furthermore, at least during peak periods, simultaneous operation of Mutsamudu and Domoni is desirable in order to -educe the load in the 20 kV line (the load may approach zero), and thus the losses as well. It is recommended that EEDC start preparing personnel and installationsfor parallel operation of power plants and that the new plant at Mutsamudu be supplied with adequate control and protection equipmentfor this type of operation.

4.19 An alternative to the proposed investment plan could be the separate developmentof two systems over a period of several years. One system would be supplied by the new Mutsamudu plant and include

23/ Among other drawbacks, the 4 MW plant would require the entire flow of the Tatinga river, thereby leaving the many inhabitants of the lower valley without water. - 45 -

Mutsamudu, , and Patsy as main load centers, requiring the constructionof a 3.5 km 20 kV line between Ouani and Patsy. The other system would be supplied by the diesel plant at Domoni and the hydro plant at Marahani. The difficultywith such separate developmentis that the rehabilitationof Marahani (225 kW installedcapacity, firm power of 140 kW and rehabilitation costs of about CF 420 million) imposes an unavailabilityperiod of 24-28 months. During that period, the two units at Domoni would not be sufficient to supply peak demand with reserve margin. Rehabilitationwill thus require a temporary reserve unit in Domoni or a (temporary)interconnection with Mutsamudu.

4.20 The relatively short length of the 20 kV line (18 km) makes it an attractive option and one which will have to be implementedsooner or later. However, as in Grande Comore, a reduction of investment costs should be seriously investigatedand procurementundertaken on the basis of open bidding. Specific costs should not go above CF 12 million/km (US$35,000/km) for the line and CF 280,000/kW (US$850/kti)for the generatingunits, includingauxiliaries and electricalequipment. Using these values, EEDC's investments in Anjouan during the next two years could be reduced by CF 215 million (US$0.65 million). The savings could increase to CF 433 million (US$1.31million) if installationof the third unit at Mutsamuduwere postponed.

AlternativeInvestment Plans

4.21 For both islands, two alternative investment plans for the period 1987-1995 are presented in Tables 4.1 and 4.2. In Table 4.2, sequence (a) shows the investmentplan as proposed by EEDC and using its specific costs. New capacity has been added in order to meet demand growth as projected by the mission. Units No. 1, 2, and 3 in Grande Comore were assumed to be replaced during 1993/4 by an equivalent capacity of 2.4 MW. Sequence (b), using typical but still fairly high internationalcosts for generators and 20 kV lines, representsa minimum investment plan, able to meet demand requirementswithout reduction in reliability,while postponing the commissioningof new units as far as possible. For the new units No. 1, 2, and 3, replacement costs of US$600/kW have been used, assuming that part of the existing infrastructure remains. Furthermore, sequence (b) in Grande Comore assumes that the hotel in Mitsamiouliwill be supplied by its own captive plant, so that unit No. 5 at Voidjou is rated 1.2 MW instead of 1.8 MW. A summary of the alternativesis presented in the following Table 4.2. The total differencebetween investmentplans for the next nine years may reach CF 1,300 million (US$3.7 million) or 30% of EEDC's plan. The differenceis rather significant: it would have a major financial impact on LRMC and deserves further evaluationby EEDC and the Government. -46 I

Table 4.2 OOMOROS:ALTENiATIVE POWER SUBSECTOR INVESTMENTPROGRAMS 1987-1995 (millionCF)

Proposedby EEOC Proposedby Mission

(a) (b) GrandtsComore Unit 5 (VoidJou) 684 (1.8MW) 336 (1,2MW) Unit6 (Voidjou) 684 1.8MW) In 1993) 504 (1.8MW In 1992) ReplaceeintUnit 1,2,3 912 (2.4MW in1993+4) 475 (2.4MW in 1993+4) Other 375 375 Subtotal 27655 1690

Anjouan Units 1,2 (Mutsamudu) (1988)436 (640xkw*SIO34AkW (1988)360 (same* S850/kW) Unit 3 (" )(1988) 218 (640kW g 1034AkW) (1990)180 (same* S85O/kW) Other 453 458 Subtotal 1447 1193

Total 4102 2883

Total (discounted* 12% pea.) 2980 2132

Total(USS000O) 12430 8740

Total (USS'000Discounted 012% p.a.) 9030 6460

Source: EEOC and Mission Estimates,

The investments discussed in the previous paragraphs are practically all under implementation. The main recommendation (of reducing and postponing investments) has therefore been overtaken by events. Thisq, however, does not mean that the recommendation was inappropriate. Par from it. Analysis in this Report shows that the most effective way of reducing electricitycosts is to reduce capacity costs (capacity costs account for about 603 of LRMC). This is no longer possible at Voidjou, but it could still be done at Mutsamudu by acquiring and installingonly two of the three groups proposed for the new plant. However, if all these investmentswere considered firm (not reduceable) then the increased depreciation and (in due course) increased financial charges for debt service would certainly cause heavy losses, thereby threateningEEDC's recently attained precariousbreak-even point. - 47 -

Issues in ElectricityPricing and EEDC Finances

Present ElectricityTariffs

4.22 EEDC applies a uniform tariff throughout the three islands. Its structure practically consists of a single flat rate of CF 120/kWh. The only deviationsare a slightly more favorableprice of CF 110/kWh for the first 40 kWh consumed during the two-month billing period and an "industrial" tariff of CF 115/kWh. Neither discount is substantial enough to have any real impact. No distinction is made between medium voltage (MV) and low voltage (LV) consumers and between load centers. The structure has been the same since 1980, but between December 1980 and September 1983, the price of electricitywas raised by 130%.

4.23 The price of electricityin the Comoros is among the highest in the world--and so are losses--butthe flat tariff structuredoes not give consumers a clear indicationof the costs of increasing their demand for power or energy and does not encourage efficient use of capacity. The applicationof a uniform national tariff also impliescross subsidization among electrified areas, as operating costs in the inland centers and Moh6li are higher (sometimes much higher) than in Moroni (in Grande Comore) or Mutsamudu (in Anjouan). In addition to possible inefficienciesof EEDC, the high cost of power is also caused by the very unfavorabledaily load curve mentionedabove.

4.24 The breakdown of private consumers by catsgory of consumption shows that 42% of all private sector consumers in Grande Comore, 48% in Anjouan, and 73% in Moheli use less than 20 kWh/month. Eighty percent of consumers in Grande Comore, 89% in Anjouan, and 95% in Moheli use less than 100 kWh/month. On the other hand, 2.7% of total private consumers (i.e., about 165 clients) have monthly consumption in excess of 500 kWh. On the whole, the top 2% of consumersuse as much electricity as the remaining98%.

ConnectionCosts

4.25 In addition to tariffs, there are significantconnection costs (CF 75,000 or US$227 for a single phase, CF 150,000 or US$455 for a three-phaseaerial connection, including a differentialcircuit-breaker, a load-limiter,and a watt-hour meter--in Moheli charges are reduced by 50%), and advance payments for future consumption (for Comorians, CF 5,000; for expatriates,CF 50,000).

Characteristicsof Present Tariff Structure

4.26 The main drawbacks presented by the existing tariffs are the following: - 48 -

(a) substantial cross-subsidizationresulting from the uniform national tariff;

(b) a single tariff with nu practical distinctionbetween consumer categoriesor types;

(c) no charges to encourage consumers to shift their consumption off peak, especially important for large consumers. Only energy charges are billed, distorting the structure of demand and providing no incentive to consume electricitywhen it can be suppliedmost cheaply;

(d) no distinction between MV and LV consumers, which means that the tariff does not reflect the differentcosts associated with each of these two voltage levels;

(e) no provision for power factor correction or for billing reactive energy for large consumers which increases losses in the distribution system, thereby increasing the systems' capacity needs; and

(f) unmetered street lighting charged to individual consumers proportionatelyto their monthly consumption. The authorities responsiblefor lighting have no incentiveto conserve energy.

Tariffs and Long-Run Marginal Cost (LRMC)

4.27 The present tariffs require restructuringin order to provide incentives to consumers to use electricity efficiently, to adequately reflect the cost of supply incurred by EEDC, and to improve demand characteristics. Such restructuringshould be based on LRMC of supply, daily and seasonal patterns of peak demand, EEDC's financial requirements, and the ability of consumers to pay for electricity. Detailed proposals should be based on a full tariff study which EEDC is willing to commission. It is recommendedthat the study of marginal cost based tariff be made part of a technical assistance activity to define the main elements of a power investment strategyand program. This study should consider charges to encourage off-peak consumptionand penalties for low power factor (when justifiedby the cost of metering),as well as having geographically differentiated tariffs to reflect the wide variations in costs between systems.

4.28 Existing prices paid by typical consumer categories and the corresponding strict LRMC values calculated according to EEDC expansion plan and cost levels of equipment and civil works are summarized in Table 4.3 below. (See Annex 3.1 for detailed calculation of LRMC in Anjouan and Grande Comore.) Table 4.3: COMOROS: LONGRUN MARGINAL COST Of ELECTRICITYSUPPLY

Grande Present Camoro Anjouan Tariff (avg)

Equivalent Energy Cost (CF/AWh) Medium Voltage (MV) 81 111 118 Low Voltage (LV) 111 210 118

Capacity Costs in CF/kW/month) MV 16,000 32,000 - LV 22,000 43,000 -

Energy Costs (CF/kWh) 37 36 - LV 44 44 -

Source: Annex 3.1.

4.29 The reduced investment program suggested earlier totals CF 2.9 billion. This reduced program would cut investment costs by 25-30Z in the period 1987-95 (especially by procuring in a more competitivemanner) and would result in maximum total equivalent energy costs of around CF 160/kWh for low voltage consumers in Anjouan (versus CF 212 under EEDC's program). Tariffs directly based on LRMC could generate higher revenues for EEDC with small overall increases,as higher costs in Anjouan could be partially subsidizedby lower costs in Grande Comore if a uniform national structurewere retained.

ProposedNew Tariff Structure

4.30 The implementation of a new tariff structure should be accompaniedby a redefinitionof consumer categories. A differentiation between LV and MV consumers is a major priority. MV consumers can accommodate,and actually require, more elaborate mecering structures, but also incur lower per unit charges. There were about 30 MV consumers in 1986. A two-part tariff can be proposed,with a demand charge (per kW) in combinationwith energy charges. 24/ Billing different peak and off-peak energy charges is not presently recommended,as the difference is small and requires rather more elaboratemetering and billing.

24/ Charges based on time of day would be costly to implement (meters) and could affect only a few large consumers who could shift their peaks outside the system's peak. However, since large customers negotiatedirectly with EEDC, a capacity charge that took account of the simultaneityfactor (SF) would probably be sufficient. - 50 -

4.31 For LV consumers also, the high share of capacity costs in total costs suggests that a two-part tariff with demand and energy charges be applied, as far as possible, to the higher consumption group of LV consumers. The demand charge would be related to the maximum current of the installed load limiter. The current practice of installingcircuit-breakers with load limiters for all connectionsallows the implementationof the new structure at no significant additional costs.

4.32 Introductionof a special two-part tariff (in association with a connection without a load limiter) might be an appropriate way of making allowance for the particular situation of low-income households, and at the same time promoting the social objectivesof the Government. These households could opt for a "social" tariff with a low fixed monthly fee and an energy charge higher than the standard low-voltagecharge (see Table 4.4 below). The tariff would provide subsidizedelectricity for consumptionbelow a certain level considered sufficientto cover minimum needs such as lighting. The level could be set around 20 kWh/month, and would apply to about 2,800 consumers. Consumerswould have an incentive to move to the standard LV tariff, with load limiter and thus with individualpeak shaving,as soon as their consumptionexceeded the cross- over point of both tariffs. The charging of a flat fee without energy charges for low income consumers is not recommended,as it requires a system of checks to avoid multiple connectionsto the same household and to keep consumptionwithin the limits assumed when setting the fee.

Table4.4: COMORDS:TENTATIVE TARIFF RECOIMtENDATIONS

Capacity Energy

MV consumers 6000-12000 CF/month/kW 50-60 CF/kWh LV (thraG-phased large consuers) 8000-15000CF/month/kW 70-80 CF/kWh LV (small consumers) 1000-2000CF monthly fee 150-200CF/kWh

Source: Mission estimates.

4.33 Low-voltage,three-phase domestic, commercial, industrial,and administration consumers would have a two-part (demand and energy) structure. 25/ In June 1986, there were 1,216 such consumers (953 in Grande Comore, 233 in Anjouan, and 30 in Moheli). Contracted power is at least 3 kW (3 x SA) and monthly consumption is normally higher than 200 kWh. The demand charge could be set in the range CF 8,000-

25/ It is particularlyappropriate to bill big domestic consumers (like expatriates)according to such a structure. They are responsible for importantEEDC installedcapacity, but during their absence (for two month holidays)do not compensate the utility if billed only for energy. - 51 -

15,000/monthper kW of load limiter and the energy charges in the range CF 70-80/kWh.26/ Attention should be paid to industrial or commercial consumerswith demand outside system peak times or which could shift part of their consumptionoff-peak, e.g., significantnon-lighting loads.

4.34 Tentative values for the two-part tariff for MV consumerscould be: (a) demand charge in the range CR 6,000-12,000/monthper kW of load limiter (or contracted demand), and (b) energy charges in the range CF 50-60/kWh. Power factor correction should be required up to a value of 0.90. The ranges suggested above should be checked with a more careful balance of costs in the three islands to average the final rates, as well as with an appraisal of financial revenues and requirementsof the utility.

EEDC Financial Situation

4.35 EEDC tariffs have been set at levels which aim to recover the accounting cost of kWh sULd. Nevertheless,the utility has incurred net losses from 1981 to 1985. EEDC has no self-financingcapacity and must rely on loans to finance all its investments. The significantly improving trend from 1981 to 1983, from net losses of CF 260 million to approximate breakeven was reversed with losses of CF 47 million in 1985. Results have been strongly influencedby allowances for bad debts, but audits conducted by the French Caisse Centrale de Cooperation Economique (CCCE) questioned the correctness of the accounting procedures, so that results in different years are not immediately comparable.

4.36 Significant features of the financial cost structure in 1985 are the impact of fuel costs (48%), the negligible proportionof finance charges (less than 2%), and the considerable proportion of "other moteria]R" (15%). and "depreciation" (18Z). "Personnel" (wages and social benefits but excluding expatriates' wages) account for 10% of total costs. Materials and personnel (roughly equivalent to operation and maintenance (O&M) costs) currently represent a high percentage of total costs in spite of the low level of salaries. The relative weight 27/ of fuel and financial charges will change in 1987 when interest on long-term debt more than doubles, and when principal starts being repaid in the early 1990s.

26/ SF of 0.5 for MV consumers is assumed in Anjouan and 0.85 in Grande Comore. For LV consumers the SF is assumed to be unity--these assumptionsunderlie the proposed capacity charges (Table 4.4).

27/ EEDC currently buys diesel oil, exempt from taxes, at CF 139.44/literin Grande Comore and Moheli and at CP 143.44/literin Anjouan, which is approximatelyCF 40/liter below the price charged to retailers,but about 50% above approximateborder costs. - 52 -

4.37 Given that important investments28/ to be financed by a loan from CCCE are expected to be carried out in 1987-89, financial and depreciationcharges are expected to increase sharply. Those investments will add to the financial burden, but cause virtually no increase in sales. Annual depreciationwill rise by at least CF 150 millior (linear depreciation). It is thus essential that the utility defer part of the investment. An alternative,reduced investmentprogram has been proposed in para. 4.22. In a period of expected slow load growth (1987-95) and replacementof generating equipment, revenue requirementswill rise and the poor financial situation of EEDC will be aggravated, but additional fixed costs will have to be passed on in the form of tariff increases, further discouragingconsumption.

4.38 The different sizes and development stages of the networks in the three islands and the existence of a uniform national tariff led to cross-subsidizationamong islands. Moheli is incurring systematic high losses which are not covered by profits elsewhere. The situation of Moh6li is of concern, as sales do not even cover the costs of fuel, let alone depreciation. As high depreciationcharges will continue because of excessivecapacity, there is no sign that the situationin this island will improve. The differingpurposes of new investmentsin Grande Comore and Anjouan--increasingcapacity versus replacement--arealso conducive to differingLRMC in the two islands. In spite of politicaland regional drawbacks, consideration should be given to the possibility of establishinga geographicallydifferentiated tariff which would provide EEDC with sufficientrevenue to recover fixed costs.

Billing and Collection

4.39 Since 1983, EEDC considerably improved billing and revenue collection procedures, enforcing a policy of tight payment schedules, disconnections.and penalties together with computerizationof client processingand billing. The average collection period for 1984 and 1985 was 5.4 and 3.9 months, respe.-tively. This overstates the arrears because, at the end of the year, one bimonthly bill is still outstanding--ona 10-month period, the percentage would be only 8%. In October 1986, the main arrears were CF 50 million from the hotels, CF 25 million from the mosques, and CF 65 million (dating back to 1980) from regional governments. According to EEDC, hotels had until the end of 1986 to pay their arrears and the mosques were to start paying for their electricity on November 1, 1986, with the outstanding CF 25 million written off. A solution for government arrears had not been found and they were expected to increase in 1986. The issue deserves careful attention and it is recommendedthat accounts with the State be settled, preferably through a financialrestructuring of EEDC, with debts of EEDC

28/ Including the fifth unit at Voidjou, the new diesel plant at Mutsamuduand the 18 km, 20 kV line from Mutsamudu to Bambao. - 53 -

to the State compensatingfor energy, or by increasingGovernment budgets for energy consumption. Better load management and energy control in governmentbuildings could lead to lower energy costs and prevent the re- emergenceof arrears in the future.

Issues in Organization,Managemnt, OperationalEfficiency, and Training at EEDC

Background,Organization, Management, and Staffing

4.40 EEDC was established as an industrial and commercial public entity ("Etablissementpublic a caract&re industriel et commercial")in 1980. It is under the technicaljurisdiction of the Ministry of Planning and the financialcontrol of the Ministry of Finance, but neither govern- mental authority has the necessary human and institutionalresources to adequately set and supervise the main policies and strategies in the power subsector. This is probably one of the reasons why there is no long-term expansion plan, no comprehensivemedium-term investment plan, and why no backgroundstudies have been prepared on tariff policies.

Managementand Staffing

4.41 At the highest level, EEDC is supervised by the Management council ("Conseil d'Administration"),a predominantlypolitical body of 10 members whose chairman is appointed by the President of the Republic. Executive managemerntis carried out by a Director General (DG) who sits in during the meetings of the ManagementCouncil. At the regional level, technical and administrativemanagement is the responsibilityof three Regional Directors,one for each island, who report to the DC. In July 1986, EEDC employed a staff of 264 persons, of whom 20 are in the AdministrativeServices directly connected to the DC, 156 are in the Regional Directorate of Grande Comore, 69 are in Anjouan, and 19 in Moheli. In terms of sectoralallocation, 28 persons were assigned to the Water Sector and all the rest to the Electricity Sector. To this permanent staff should be added the three Regional Directors and five expatri4tes(including the DC and four technicaland financial experts).

4.42 Performance indicators are extremely low, although there has been some improvement since 1983, mainly in better metering and billing. At the end of 1985, general indicatorswere 16 consumers per employee, 0.03 GWh sales per employee, and 35 employees per installed MW. Better managementcould probably improve these figures, although the characteristicsof EEDC's system (i.e., several isolated systems in three islands)will not permit significantimprovement. - 54 -

Issues

4.43 Operational Efficiency. The poor financialand administrative situationof EEDC in 1981 led the new expatriatemanagement to focus on these issues, as well as on the technical operating practices in the power generation and distribution system. Significant financial and administrative improvements have been achieved, resulting in better quality of service, reduction of theft, adequate metering and biLling, and importantreductions in arrears. Operating problems in power plants were not given the same type of attention and this led to deterioration of the equipment. This situation is being corrected through recently contracted technical assistance in operation and maintenance of diesel plants. Lowest priority was given to planning activities, i.e., demand forecasts,evaluation of alternativeexpansion plans, both in generation and distribution (with an economic and financial appraisal of their implications),and project evaluation (or appraisal of pre-feasibility and feasibility studies made by external consultants). This is an important shortcoming in the present organizationof EFnC and urgentIz requires correction in the form of a small "forecastingand planning" unit attached to the DG's office (see Annex 3.3).

4.44 Facilities Operation and Maintenance. The ability of EEDC to adequately operate and maintain its facilities presents an important issue, especially with the major additions to the plant and the grid which are being discussed. While there are no major problems with transmissionand distribution (some technical recommendationsare given in Annex 3.4), resolving power plant operation and maintenance problems should now become a priority for EEDC and staff resources should be directed to this activity. Poor operation and maintenance are partly to blame for requiring additions to capacity earlier than otherwise, and with higher costs as a consequence.

4.45 In spite of long periods with units operating at low loads, operationalefficiency is low. Inefficientoperation has been feasible in the past because high costs have simply been shifted onto the consumers by raising tariffs. The characteristicsof present demand are not well known and thus demand projections are a weak point in all studies that have been undertaken to date. Incorrect combinationsof power and energy measures are leading to wrong estimates of load factors and peak demands. The high cost of energy and capacity justifies significant improvementsin collecting and processing power and energy figures, thus permitting EEDC to assess more preciselyhow energy is - 55 -

generated, transmitted,and consumed.29/ A number of technicalcomments and recovmendationsare made in Annex 3.4.

4.46 Maintenance. EEDC has been unable to devise and implement an effective preventive maintenance policy for its plants. As a rule, maintenancework is not performed systematicallyand generator overhaul schedules are not adhered to because of either capacity constraints (i.e., no reserve available),lack of spare parts or lack of qualified manpower. Maintenance scheduling is based on checklists drawn up by maintenance staff, but there is no control mechanism to ensure that the work on the checklistis actually carried out.

4.47 The situation may improve with the arrival of an expert in diesel units who is to give technical assistance to EEDC for two years. Nevertheless, the expert cannot overcome the shortage of qualified manpower, workshop facilities, vehicles, tools, and spare parts. Furthermore,the staff, in general, lack training in basic electricity, diesel plant operation, and load management. An amount of CF 90 million (US$273,000)for spare parts is included in the loan for unit No. S at Voidjou, recently approved by the CCCE, together with CF 40 million (US$121,000)for a new warehouse and workshop facilities. Such amounts may answer the most pressing needs, but EEDC still lacks a long-term maintenancestrategy. This report strongly recommendsthe preparationof a maintenance strategy and draft Terms of Reference for the preparation of such a strategyare included in Annex 3.4.

4.48 Supply Reliability. Reliability of supply, especially in Grande Comore, has improved since 1983, but there are still frequent interruptions,mostly because of outages in the distribution system. With the present configurationand protection scheme,any fault in the MV system is cleared by opening the breaker at the power plant, thereby disconnectingthe entire feeder. The procedures for fault detection are unacceptableand the long interruptiontimes are mainly due to the lack of communicationequipment between the crew in the field and the power plant. It is recommendedthat EEDC acquire adequate radio communication equipment, to be installed in one of the vehicles used by line repair crews. The cost of such equipmentis estimatedat about US$90,000.

29/ Even though the shape of the load diagram and the rated capacities of the units hinder their optimum matching, improved measuring equipmenttogether with better plant operationand maintenancecould significantlyincrease overall efficiency. As an example, for the expected generation of Voidjou during the 10 years between 1987 and 1996, an investmentof CF 200 million to reduce specific consumption by 0.02 kg/kWh would have an internal rate of return (IRR) of l5Z. In other words, reducing plant specific consumption from 0.290 kg/kWh to 0.270 kg/kWh would save about 3,600 tonnes of diesel oil which, at an economic cost of CF 90/liter (or CF 106/kg), would amount to a present value (1987) of CF 200 million (US$610,000)at a discount rate of 15X. 4.49 Manpower and Training. Shortages of skilled and qualified manpower are ubiquitous in the Comoros. EEDC pays a high price because of this shortage. It must rely on expatriatesand its operations are inefficientand costly. The main problems that EEDC faces in manpower and training are the following:

(a) strong reliance on expatriates with no provision for counterpartstaff at high level positions;

(b) low qualificationsand inadequateexperience of most staff;

(c) high degree of centralizationin managementand decision-making at the DG level;

(d) lack of a long-term strategy and resources for personnel training;and

(e) lack of personnel able to plan future expansion and investments.

4.50 The key management and technical positions, including that of DG, are currentlyheld by expatriatesand there is no evidence that they could be replaced in the near future. Four expatriates are acting as technical advisors on Distribution Networks, Diesel Power Plants, Automatic Data Processing, and Accounting. In contrast, there is no Comorian skilled manpower with a minimum of academic training in EEDC. There are no university graduates (or equivalent) in the company (electricalengineer, mechanical engineer, economist, for example) 30/ able to act as counterpart local staff for management or executive positions. In addition,responsibilities at the middle management level, like Chief of Operations, or Power Plants Chief, which normally would require the equivalent of an IUT 31/ or a BTS 32/, are being discharged by personnel with lower levels of training (e.g., CAP 33/ or a BEP 34/), or even less, who manage to functionwith a generous measure of goodwill and dedication but are unable to overcome structural deficiencies in their training. Such training cannot be acquired on-the-job and under the pressure of day-to-day operations. Of particular concern should be the preparation of qualified personnel for the new diesel plant at Mutsamudu and for the extension of the distributionsystem in Anjouan.

30/ The highest qualifiedComorian staff member is the Regional Director of Moheli, who has an I.U.T. degree--seenext footnote.

31/ IUT - Institut Universitairede Technologie (normally baccalaureat plus two years).

32/ BTS - Brevet Technicien Superieur (normally baccalaureat plus two years).

33/ CAP - Certificatd'Aptitude Professionnelle.

34/ BEP - Brevet d'Etudes Professionnelles. - 57 -

The existing personnel in Mutsamudu do not appear to have the required qualificationsto guaranteeadequate operation and maintenanceof the new plant. The two-year period until the plant is completed should suffice to prepare a new team or at least to find qualifiedpersonnel for the top positions.

4.51 The expatriate technical advisors have no line authority over EEDC personnel and thus cannot give orders; they can only make recommendations. Only the Director General can give instructions. As a consequence, decisions are highly centralized at the DC level, with a potential for overload of decision-makingcapabilities at this level due to the multitude of minor decisions which must be handled here. It is recommendedthat EEDC either officiallyappoint the technicaladvisors to the management functionscorresponding to their area of activity or that it appoint or recruit qualified local staff to discharge those responsibilitiesafter an appropriateperiod of training.

4.52 Training Needs. Another area to be given priority is the design of a long term training strategy tor all staff levels. Scholar- ships granted by the FAC or special training programs implemented by German technical assistance in connection with the building of the Fomboni power plant did not result in significant improvement in the qualificationsof EEDC personnel. Recruitmentand selectionof trainees are not always made on the basis of merit. The training strategy should identify the needs of EEDC at all levels for the next 5-10 years, the available human resources (both inside and outside EEDC), and prepare a combination of scholarships, long-term and short-term courses (basic subjects and refresher courses), and on-the-job training. Specific technical assistance to prepare a training program is recommended and financing for its implementationshould be sought. EEDC should guarantee that the selectionof trainees would be made purely on merit.

4.53 In designing the program, it would be useful to review: (a) the duration and scope of the training; (b) the number of staff required and available for each category of training; (c) the promotion received after completion;and (d) a mechanism to retain trainees in EEDC for a minimum period (5-7 years) after completion of training. Rough estimates of the medium-term needs of EEDC based on investmentsalready decided and the utility's present personnel situationwould indicate that in the coming three years, a minimum of about five engineers/accountants and about 10-12 techniciansshould receive special training. - 58 -

Sumary of Main Power SubsectorRecommendations

While all recommendationsare underlined in the text, the main ones are summarizedbelow:

(a) Reduce the investment program of EEDC from CF 4.1 to about CF 2.9 billion, and prepare a least-cost investment program based on the suggestedpostponement and scaling down of planned investment, procurement through international competitive bidding, plant rehabilitation, and loss reduction. New investment in 20 kV networks should be postponed until the least cost investmentprogram is completed.

(b) Review tariff policies through a marginal cost-based tariff study that would redefine consumer categories, introduce separate capacity and energy charges, and, if justified, time of day kWh rates for the largestconsumers.

(c) Settlement of arrears of government agencies through financial restructuringof EEDC.

(d) Prepare a training program (5 university graduates, 10-15 higher level technicians) to ensure a reasonable level of operating efficiency in the proposed Mutsamudu diesel plant and, as an interim measure, appoint the technical advisers to execute the management functionscorresponding to their area of activity.

(e) Preparea preventivemaintenance study and procedures for power plants and transmissionlines.

(f) Prepare to operate various plants in parallel in Anjouan and further study the feasibility of rehabilitatingthe existing small hydro plants.

(g) Establisha small forecastingand planning unit at the level of the DC of EEDC. - 59 - Annex 1.1 Page 1 of 2

OUTLIUS OF A PROPOSAL FOM A STOVE DISSIIM&TIOU PROGRAM

The above dissemination program should focus on Mutsamudu, Moroni, and the rest of the island of Anjouan. The Comorian counterpart institutionsshould be the Energy Planning Unit and the CEFADER. CADER extensionworkers should assist in the field-levelwork on Anjouan.

The project should be executed over a two-year period and include the followingactivities and phases:

(a) an empirical study of the fuelwood consumption patterns, cooking habits, and diets of both urban and rural households;

(b) adaptation of a one-pot metal stove for use with the specific types and sizes of pots and other cooking utensils commonly used in the Comoros;

(c) training of Comorian metalworkersin stove building techniques, and technicaland administrativesupport of such artisans;

(d) training of both the extensionworkers assigned to the project and a certain number of CADER extensionworkers;

(e) demonstrationand sale of the stoves by extension workers;

(f) a comprehensivepromotional campaign (education,sensitization, and advertising);and

(g) follow-up measures and studies to monitor the impact of the program.

The staff of this project should also collect data (prices, quantities produced, sold, used, efficiencyof utilization,etc.) needed for all biomass/household energy projects (e.g., improved stoves, improved combustion for ylang-ylangdistillation, forestry, substitution possibilities,etc.). This data could be the nucleus of a permanentdata bank kept by the Energy Planning Unit.

The staff should also examine the structure and practices of the woodfuels trade and recommend rules and regulations to protect or foster the competitivenessof this trade. - 60 -

Annex 1.1 Page 2 of 2

Budget

Biomsas/EnergyEconomist 10 r/month US$100,000 Stove/ruralindustry spec. 6 r/months US$ 60,000 Sociologist/homeeconomics/nutrition expert 2 m/months US$ 20,000 Subsistence US$ 50,000 Airfares US$ 35,000 Local services (2 months) US$ 20,000 Report writing US$ 20,000 ESNAP Supervision US$ 30,000 2 4WD vehicles US$ 50,000 Local staff, materials,and recurrentcosts US$200,000 Subtotal US$585,000 Unallocated US$ 15,000 Tote1 US$600,000 - 61 -

Annex 1.2 Page 1 of 3

DISTILIATIONOF YLAUG-YLANG

A single ylang-ylang tree produces between 3-5 kg of flowers annually. On the small fields (1-3 ha) utilized by most Comorian farmers, the maximum yield is about 4 kg per tree. If a density of approximately400 trees/ha is assumed, the annual per-hectareyield is of the order of 1,600 kg of flowers, the market value of which is currently around CP 136,000.

Up to 1,200 kg of water must be vaporized in order to process 120 kg of ylang-ylang flowers. The temperatureof the water is 25C before it is introducedinto the distilleryboiler.

Water has a specific heat capacity of 1 kcal/kg x °C, and its heat of vaporization is 539 kcal/kg. In other words, 75 kcal are required to raise the temperatureof 1 kg of water from 25C to 1004C. However, once this quantity of water has been brought to the boiling point, an additional539 kcal must be expended to convert it into steam.

All in all, some 736,800 kcal are expended in the course of each distillery run (1,200 kg of water): 90,000 kcal to bring the water to the boiling point and 646,800 to vaporise it. Eighty-eightpercent of the total end enirgy consumed in the process is used to vaporize the water. In order o supply the final energy requirementof one distillery run, a total of . m of wood (1,750 kg = 6,125,000 kcal) are currently utilized. The overall efficiencyof the process is of the order of 12%.

It has often been suggested that the distilleries should utilize solar energy to preheat the water in order to conserve biomass. However, a substitutionof this type would not make economic sense. In terms of final energy consumption,only 54,000 kcal (7.37 of the total end energy) are required to heat the 1,200 kg of water used in each distilleryrun to a temperatureof 70°C.

If solar (thermal)energy were used for this purpose insteadof biomass, 110 kg of wood (CF 220? could be conserved. Assuming a solar energy supply level of 4 kWh/m /d and a collector efficiency of 50%, 31.5 m2/d of collector area would be needed in order to supply 54,000 kcal. Given investmentcosts of CF 50,000/m2of collector area, a lifetime of ten years and a discount rate of 10%, calculationsyield a cost annuity of CF 256,600. Thus, assuming each distilleryprocesses 40 batches per year, energy supply costs for preheating alone work out to CF 6,400 per batch. Moreover, even if the solar-thermaloption were economicallyattractive in this case--which it obviously is not--there would still not be much point in switchingto solar energy in the initial heating phase, as it would only save an insignificantshare of total biomass consumption.

The mission also assessed the economics of substituting the fuelwood with diesel oil. Assuming end-use efficiency rises to 50%-- - 62 -

Annex 1.2 Page 2 of 3

which amounts to a fourfold increase--approximately180 liter of diesel would be requiredper distilleryrun. In other words, the fuel costs for a typical *mall-scale distillery would amount to CF 32,400 per batch (market price: CP 180/liter). Even if calculationsare based on the economic costs (80 CF/liter),the fuel costs would still be of the order of CF 14,000 per batch, and thus almost as high as they would be in the case of a switch from fuelwood to hard coal.

If all the distilleries substituted diesel oil for fuelwood, the country would have to increase its annual diesel imports by 2,150 tonnes, or 2,550 mi. Based on the economic cost of CF 80/liter, that would raise the national oil bill by CF 204 million, which is equivalentto 32Z of the total annual export earnings from ylang-ylang.

Given the present price structure, the substitutionof fossil fuels for fuelwoodwould not be economic.

The above discussion makes it clear that there is only one economicallyfeasible way to achieve significantreductions in fuelwood consumption of ylang-ylang distillation and that is to increase the efficiencyof fuelwood combustion.

Consequently,in addition to the proposed stove dissemination program, the mission recommends that a similar project be initiated in the ylang-ylang industry to promote the introduction of more efficient wood burners. A program of this type would have good prospects for success, as it would have a relativelysmall target group (just under 200 distillers),which would be relativelyeasy to reach and monitor.

A social scientistand a technicalexpert should be sent to the Comoros on an appraisal mission to lay the groundwork for such a program. This mission would include the followingtasks:

(a) analysis of the distilleries'fuelwood supply structure;

(b) investigationof the input-output interrelationshipsin the industry (producers of ylang-ylang flowers, purchasers of ylang-ylangessence);

(c) analysis of the productionprocess in the distilleries;

(d) classificationof the distillerieson the basis of economic and technicalcategories;

(e) development of simple, fuelwood-saving burners for the distilleries;

(f) economic assessmentof the improved burners;

(g) identificationof an appropriate counterpart institution to handle the introductionof the new burners; and - 63 -

Annex 1.2 Page 3 of 3

(h) proposals for complementary measures to promote the dissemination of the new burners (restriction of access to forest resources,credit programs, trainingmeasures, etc.).

Costs

The cost of one social scientist and one technical expert for 1.5 months each for this program would be $US40,000.

Based on the findings of the appraisal mission, a decision could be made as to the advisabilityof initiatinga program to introduce more efficientfuelwood burners in the ylang-ylangindustry. - 64 -

Annex 1.3 Page 1 of 3

BIOKAUSGASIFIER - MOIBLI

Technical Aspects

The 40kW gasifier will run on a mixture of husks and shells which will be brought to the site in 801 bags. It will be necessary to refuel the plant every two-three hours. The moisture content of the husks and shells will have to be 20Z or less wet basis (w.b.). If feedstockwith precisely this moisture content is used, the unit's fuel consumption will amount to 65 kg/hour, or 650 kg/day, assuming 10 operating hours. 1,200 kg of undried, unprocessed input material (55% moisture content wet basis or m.c.w.b.) will have to be supplied every day to meet this fuel requirement,and this quantity of shells and husks will not only have to be gathered, but also stored, dried, shredded, mixed, and put into bags.

While it is in operation, the unit will have to be monitored constantlyby a mechanic. His services will be required for a total of 12 hours/day, including time spent on start-up and shut-down activities, and thus two mechanics will be needed. A vehicle driver and an additionalworker will be required to gather the coconut residues to fuel the plant; production of 1 kWh requires the waste portions of three coconuts,and thus the shells and husks of some 1,200 nuts will have to be transportedto the site every day. An additional worker will have to be employed to take care of storage, drying, shredding, and mixing. Shreddingwill require utilizationof a machine that consumes 15 kWh/hour for 1 hour/day. The plant will generate 1.5 liters of highly toxic, phenolic liquid waste per hour, which will have to be stored in drums and disposed of (one 200 liter drum) every two weeks. Needless to say, this residuewill have to be handled very carefully.

For technical reasons, it will not be possible to begin feeding the gasifier plant's powet output into the existing grid on Moheli immediately. There are a total of nine transformerslocated along the transmission line, which is 10 km long, and the gasifier unit is incapableof producing the high charginz current required for a system of this type. In any case, a synchronize:will have to be purchased for the plant (CF 5 million) so that the 40kW gasifier generator can be synchronizedto the grid.

Economic Aspects

The investmentcosts of the Alsthom gasifier are CF 22 million. c.i.f. MohMLi. The technical lifetime of its individual components, excludingthe engine, is assumed to be five years. The engine is assumed to have a technical lifetime of three years. To simplify matters, the plant as a whole is assumed to have a lifetime of four years. Additional cost componentswould be as follows: - 65 -

Annex 1.3 Page 2 of 3

(a) a power house (CF 3 million);

(b) a dryer (CF 1 million);

(c) a shredder (CF 4.5 million);

(d) a synchronizer(CF S million),all of which are assumed to have a lifetime of eight years. The cost of the vehicle required for collection of the biomass (lifetime: four years) will be set at CF 4 million).

The above figuresyield annual investmentcosts of approximate- ly CF 10.7 million (i = 10X). The gasifier is assumed to have total annual operating costs of CF 5.5 million: CF 2 million for maintenance and repair of the unit; CF 1.5 million for vehicle maintenanceand fuel; and CF 2 million for wages. Thus, the total annual costs of electricity supply are of the order of CF 16.2 million.

By comparison, the competing conventional option--a diesel generating set--exhibits annual investment costs of approximately CF 1.9 million (1 = CF 10 million; a = 8). The annual operating costs work out at CF 6 million: CF 5 million for fuel and CF 1 million for wages (two technicians,each working one shift per day). The resulting total annual costs of electricity supply for the diesel generator are CF 7.9 million, which is CF 8.3 million less than in the case of the gasifier.

If the plant is run continuouslyat full load, it will generate a total of 400 kWh in 10 hours. At this output rate, its annual production would amount to 140,000 kWh (350 days), which could be sold for a maximum of CF 16.8 million. If it is assumed that salable output will be reduced by 33Z owing to the high transmission losses in the Moheli grid and the power station's own consumption,maximum potential gross revenues drop to CF 11.3 million. However, in view of the current low electricity consumption levels on the island--above all during daylight hours, which is when the gasifier will be in operation--itis highly improbablethat demand for the plant's power output will even be as high as 200 kWh/day. If calculationsare based on this figure--which still must be regarded as rather optimistic--EEDC'sannual revenues drop to CF 5.6 million, and the plant incurs a loss of over CF 10.6 million per year.

Once the plant's operators begin regular collection of the required quantities of biomass input material, which they assume will be available free of charge, the resulting increase in demand is bound to have an impact on the economics of feedstock supply. In order to keep transportand collection costs at a reasonablelevel, EEDC will have to procure its coconut residues from the areas along the road. The land on both sides of the road is covered with coconut plantationswhose owners de-husk their small nut crops immediately after harvesting them. - 66 -

Annex 1.3 Page 3 of 3

Following removal of the husks, they crack the nuts open and allow the milk to run out so as to eliminate excess weight. Thus, while the EEDC personnel will have easy accessto the piles of discarded husks (which does not necessarilymean that they will be available free of charge), it will prove to be very difficult to acquire the required quantities of shells (252), as the farmers themselves regularly collect them and take them along with the nuts to the copra drying sites, where they are combusted as fuel.

EEDC will be forced to purchase the lion's share of all shells it uses, and the husks will soon acquire a monetary value as well. A system will quickly evolve whereby the local coconut farmers place their husk "output" in numbered bags alongside the road to be picked up by the utility'svehicle, but they will surely expect to be paid for this. The plant's annual biomass demand (undried - 55Z m.c.w.b.) will amount to some 400 tonnes. Even if EEDC only has to pay CF 2/kg, this will raise the annual operating costs by CF 800,000. Moreover, as indicated above, the shells already have an economic value as fuel for the copra dryers. Thus, once electricityproduction begins to compete with copra processing for the available supplies of shells, the per-kg feedstock price may eventually rise to a level considerably higher than CF 2. If this happens, the plant's electricitysupply costs will rise accordingly,and current revenues will no longer be sufficient to cover operating expenses,assuming they ever were. - 67 -

Annex 1.4

TERMSOF REFERENC

Forestry Legislationand Regulations

ResponsibleAgency: Ministry of Productionand CEFADER

Nature of Tasks

Review and modernizationof forest legislationin the Comoros, including the delimitation of various types of forestry reserves (by degree of exploitationwhich is permitted).

TechnicalAssistance Required

The seruices ot a legal expert knowledgeableabout forestry legislation in Africa (in the French legal tradition) would be required for about 3 ; man-months together with 3 man-months of the services of a forester familiar with degraded African forests. Together with materials and supplies,this task would require approximatelyUS$100,000.

Backgroundand Justification

In view of the severe ecological problems that can result from further deforestationin the Comoros, a review of existing forestry regulations and legislation(the most recent comprehensivelegislation was issued in 1947, with minor modifications in the 1960s) should be conducted. The objectivewould be to empower public agencies to:

(a) limit access to forests (whether public or privately owned);

(b) set rules, regulations,and standardsapplicable to both public and privatelyowned forests (or tree plantations);

(c) revise the fiscal aspects of the laws, rules, and rugulations and suggest modifications to simplify enforcement (e.g., stumpage fees and other levies or taxes designed to cover the replacementcosts of the wood being exploited);and

(d) identify and delimit forest (or tree) conservationareas such as ecological reserves (no exploitation at all), firewood reserves (accessible only to individuals and for private needs), etc. - 68 - Annex 1.5 Page 1 of 2

DRAFTOF TERMSOF REFERENCE: ENERGYPLANNING UNIT

To be created within the Ministry in charge of Planning and, under its aegis, an Energy Planning Unit (EPU), which will undertake:

(a) to assemble all available data and documentationpertaining to the energy sector as a whole, in other words on electricity (whether thermal or hydroelectric),petroleum products, wood and other biomass, and vegetable residues used as combustibles as well as new energy sources, renewable or non-conventional;

(b) to ensure the coordinationand orientationof necessary studies and research or to undertake them itself (with its own staff and/or with outside technical support), to advise the Government on the best options (investments,strategies, price policies, tariffs, taxation, etc.) to be pursued in order to ensure the developmentof the energy sector;

(c) to ensure sound planning in the energy sector (including the need for qualified labor) in order to permit satisfact:onof future energy needs in the most economic manner, to participate in supervision of the principal executive structures (companies, agencies, offices) in the sector and to assist them, if need be, to undertake planning studies (e.g., strategies,policies, planning) relevant to the EPU;

(d) to follow-up and to analyze the situation of household energy use (cooking, water-heating, etc.) in order to efficiently advise the Government and households on viable economic alternatives;and

(e) to be a fall-back and a support for all technical assistance (with the exception of that specifically for the enterprise sector for management or for activities entirely to the sector enterprises).

The EPU will not intervenein matters of internal managementof sectoral companiesand will not exercise any control thereupon. The EPU carries out its duties through the recommendationsit provides, whether to agencies controlling or supervising sectorial companies or to the management of these companies. The EPU, which is not involved in the daily management of companies or of the sector, will dedicate its resources (especially its senior staff) to resolving problems which go beyond the scope of companies of the sector (for example, problems relating to substitutionof energy sources, especiallyfor households,or anticipated--but not yet existent--problems, like deforestation or forecastingenergy needs).

The EPU will need outside support during its start-up period. In principle, two higher level Comorian staff members will need to be - 69 - Annex 1.5 Page 2 of 2

supported by two senior expatriates during a period of at least two years. Preferably,the Comorian staff will be:

(a) an electricalengineer (or techniciangraduate of an I.U.T.)

(b) an economist/accountant(with at least a Bachelor'sdegree) while the expatriates will be an energy economist and an energy engineer/planner.

The expatriate staff will untertake, together with the Comorians all tasks which the Ministry of Planning would assign them within the set of proposed responsibilitiesdescribed above for the EPU and will train Comorian staff to take over after a period of two years. Their training activitiescan extend as well to staff of other ministries (for example, the Ministry of Production) and to those of companies involved in the energy sector in the broad sense.

The intervention of long-term expatriate staff could be supplementedby short-term consultants for specializedmissions within the frameworkof the responsibilitiesof the EPU.

Budget

Expatriateeconomist/accountant - 24 man-months Energy Engineer/planner- 24 man-months

Cost: US$8,000/man-month= US$384,000

Short-termConsultants and training sessions for Comorian staff = US$100,000

Misc. materials,consumables, contingencies= US$ 16,000

Total US$500,000 - 70 - Annex 1.6 Page 1 of 3

UTILIZATION OF PHOTOVOLTAICPUMPS TO SUPPLY DRINKINGWAT3R

There is no doubt as to the basic technical feasibility of utilizing photovoltaic (PV) pumps at the existing wells in Ouela and Tsungadjou to supply the drinking water requirements of the local population. Economically speaking, however, the PV pump would not appear to be a particularly attractive option at either site, as is illustrated by the following data on the required water output in each case and the probable costs of suitable solar-powered pumping units.

Table 1: CHARACTERISTICSOF PROPOSEDEXPERIiENTAL SITES

Site Ouela TsungadJou

Pumping head (including height of tank = 3 m) 45 m 23 m

Number of inhabitants 3,127 4,361

Water requirement per person and day 20 liter 20 liter

Daily water requirement 62.5 m3 87 m3

Monthly average of daily global radiation 4 kWh/m2 /d 4 kWh/m2 /d

Source: Comorianauthorities and mission estimates.

Calculating the hydraulic energy required to pump water at the two sites

Ehyd = m * g * h * c -

Ehyd - hydraulic energy (kWh)

m - mass of the water (kg) (at a water density of 1,000 kg/m3)

g - gravitational constant (9.8 m/s2) - 71 - Annex 1.6 Page 2 of 3

h - pumping head (m)

c - constant resulting from the conversionof Ws

into kWh (1/3.6 * 106)

Ouela: Ehyd = 7.7 kWh Tsungadjou: 1hvd = 5.4 kWh

Calculatingthe Required Peak Power Output of the Solar Generator

If high-quality, properly designed PV sumbersible pumps are employed, the overall system efficiencywill probably be of the order of 3.8X. Using this figure, the required daily global radiation level can be obtainedas follows:

Eglo = Hs Ehyd

Eglo - daily global radiation (kWh)

Hs overall system efficiency (0.038)

The surface area of the PV array required in each case can be obtained using the followingequation:

A =Eglo/Emin = Ehyd/Emin/0 038 2 A - surface area of array (mn) 2 Emin - minimum daily global radiation (4 kWh/m )

Ouela: A = 51 m2 Tsungadjou: A = 36 mIV2

The solar modules are assumed to have an efficiency of 11.5X. The required peak power output of the solar generators is given by the followingequation:

Ppeak Pglo . A Hm Ppeak - peak power output of the generator (kW) 2 Pgj0V. - maximum irradiance(1 kW/m )

Hm - efficiencyof the solar modules (0.115)

Ouela: speak = 5.8 kW Tsungadjou: Ppeak = 4.1 kW - 72 - Annex 1.6 Page 3 of 3

Calculatingthe InvestmentCosts

Solar generators currently cost approximatelyUS$7,500/kW of peak power output (includingsupporting structures). For systems of this size, the cost of the other components (pump, inverter,switches, wiring, etc.) may be estimated at US$7,500.

Consequently,for solar pumps at the two sites in question the investmentcosts alone work out at approximately:

Ouela: US$50,000 Tsungadjou: US$40,000 73- Annex 2.1 Page 1 of 6

HISTORICALDIKAND FOR PIhOLsKN PRODUCTS

Between 1983 and 1986, 1/ total demand for petroleum products averaged 14,200 tonnes per year, or 35 kg per capita, which is lower than the average per capita consumption in African countries at a similar level of development. Table 1 gives a breakdown of the demand by fuel type. During the past four years, demand for each of the four main petroleum products: gasoline,gasoil, kerosene, and jetfuel, varied very little, the marginal variations reflecting changes in the level of activity of public works and airlines. Table 2 provides the per capita consumption for gasoline, gasoil, and kerosene in each island during 1985. With 75X of the country's automobile fleet and 60Z of electricity consumers, Crande Comore accounts for 80Z of the country's total consumptionof petroleum products.

Table1: IMPORTSOF PETROLEUMMrOOUCTS (tonnes)

Gasolino Gasoll Kerosene Jetfuel Total

1983 3,953 5,365 1,745 1,202 12,265 1984 4,305 6,919 1,647 1,724 14,595 1985 4,498 6,354 1,622 1,209 13,683

Trendduring 1st half of 1986 -13.5% -5% +42% -40% -5%

Source: SC>.

Table2: CONSUIWTIONOF PETROLEUMPRO0UCTS PER ISLAMDIN 1985 (literper capita)

GrandeComoro Anjouan Moh6li

Gasoline 22.6 6.6 6.7 Gaso 1 14.7 10.6 7.5 Kerosene 8 5 4

All petroleumproducts (in percentage of the country'stotal) 80% 18% 2%

Sourco: SCH.

1/ Data prior to 1983 is not reliable since before the creation of SCH - 74 - Annex 2.1 Page 2 of 6

The automobile fleet 2/ increasedat 4% per annum over the last four years, while gasoline consumption increased at near 62 per annum during that period, which suggests a deteriorationof the fuel-efficiency of the existing vehicles,and also reflects the non-existenceof a public transport system. Moroni accounts for more than 50% of the country's total gasoline consumption.

The demand for gasoil corresponds to two distinct types of consumers:

(a) the power utility EEDC, with a stable demand (3,800 m /per year in 1985) growing at 7% per annum; and

(b) the trucks 3/ and public works machinery whose consumption is less regular and peaked in 1984, as shown in Tablf 1. While consumption by the public works is known (600 m in 1985), there is no way to estimate if the balance is fully consumed by the truck fleet or if there is a significantnumber of small private power generators.

Kerosene is currently used for household lighting whenever electricity is not available,but in the future it may replace woodfuels gradually for cooking among urban households. The relativelyhigher per capita consumption in Grande Comore suggests it is in the capital city that kerosene is most widely used as a cooking fuel, while it is in Anjouan that deforestation is most critical, and (future) consumption should increasemost.

Air Comores is the largest single consumer of jetfuel (30%) even though it purchasespart of its supplies in Mayotte where the price is lower. Foreign airlines (Air France, Air Mauritius, Air Tanzania, South African Airlines)account for 602, but are trying to minimize their purchases in Moroni because of high prices. The presidential plane accounts for the remaining 10%.

Supply and Distribution

Comoros has no refining capacity and imports all its petroleum products needs from Kuwait, on the basis of 3-year contracts between SCH and the Kuwait Petroleum Corporation (KPC). Petroleum products are

2/ According to a BCEOM study in 1985, there were 2,920 passenger cars with an average use of 12,500 km/per year and an average consumption of 8 1/100 km, 510 mini-buses (40,000 km/per yer, 14 1/100 km) and 3,400 motorbikes.

3/ The mission estimates that by the end of 1985 there were 335 gasoline-fueledheavy trucks. - 75 - Annex 2.1 Page 3 of 6

imported in bulk, except for aviation gas, methanol, and lubricants, which are imported in drums, and butane, which is brought in in 1-tonne containers. The tankerswhich arrive four or five times per year contain a shipment averaging 3,500 tonnes and unload in Moroni and Mutsamudu. Moh&li is supplied from Moroni, by dhows carrying the products in drums or larger skid-mountedcontainers. SCH owns and operates six retail outlets in Grande Comore, four in Anjouan, and only one in Moheli. Total storage capacity is 5,000 m3 in Moroni, represerktingfour months' consumption in Grande Comore and Moheli, and 6,300 m in Mutsamundu, or 19 months' consumptionin Anjouan (see below Table 6).

The current storage facilities and distribution system in Grande Comore are sufficient but deferred maintenance needs to be performed and a system of preventive maintenanSe needs to be established. Two new tanks with a capacity of 3,000 m and an estimated cost of CF 250 million are being proposed by UNIDO in order to replace two tanks commissionedin 1958. While the new investment(if it does not exceed CF 250 million and the old tanks prove irreparable) may be justified,at least one of the old tanks should be repaired (if possible) so that SCH would have at least two tanks for each product.

The storage capacity in Anjouan is clearly above the economic optimum and appears to have been inadequately used (especially the decantation facilities). Other investments (tanks, trucks) are also excessive. Operation and depreciationof these new facilities are bound to increasethe costs of SCH, with little if any benefit to anyone.

In Moheli, a UNIDO 3study proposes the construction of an additional capacity of 650 m , new unloading facilities, and the rehabilitationof the Fomboni service station, costing altogether US$3.6 million. Although details of this proposed investment were not available, a project of such magnituideis completely out of proportion with Moheli's requirements. The annual consumptionof petroleum products in Moheli is about 400 tons, with a transportcost of CF 19,000 per tonne (drums carried in dhows), and thus the total annual cost of this inter- island shipment should not exceed CF 7.6 million (US$24,000). But some rehabilitationwork is necessary: some tankage (in small skid-mounted tanks), tank gauges, pumps, and volume meters, in addition to rehabilita- tion of the Fomboni service station. Those repairs should cost around CF 50 million. - 76 - Annex 2.1 Page 4 of 6

Table 3: PETROLEUMIMPORT COSTS IN 1985 AND 1986

Product 1986 Sales SCH unitary SCC profit (10 liters) Margin (CF) (10' CP) - Gasoline 6.11 s 170.6 - 1,042 - Gasoilfor transport 4.27 x 86.6 - 370 - Gasoil for power generation& public works 4.07 x 46.6 = 190 - Kerosene 2.28 x 115.8 - 264 - Jetfuel 1.05 x 126.1 - 189 Total 2,055

PetroleumPricing and Import Costs

SCH has benefited handsomely from the 1986 drop in world oil prices. A summary build-up of petroleum import costs in 1985 and 1986 is shown in Table 4. With a 60Z decrease in c.i.f. costs and a resulting decrease of about 30Z of the fiscal burden on petroleum imports--the customs duties being ad valorem on the c.i.f. prices--SCH surplus for 1986 (after covering all costs, but before corporation profit taxes) could well be in the range of CF 1-2 billions.

Table4: SUM14ARYPETROLEUM PRICES STRUCTUtRE AS OF JlNE 1986a/ (CF/IIter) Gasoline Gasoll Kerosene Jetfuel c l.f. 41.8 38.7 39.1 39.1 S6i operatingcosts 23.2 23.6 24.8 24.8 Taxes 40.1311 20.3 - SCH cost 31 824 6 Retailprice 275.7 180 200 190 SC> incomebefore Income tax 170.6 86.6 115.8 126.1 tu See detailedprice structure Table 7. rce: SCH.

Table 5: SUMIARYPETROLEtiM PRICES STRUCTURE ASOF A-UGUST1985 a/

GasolIne Gasoi I Kerosene Jetfuet c I.f. 105 107 115 115 S61 operatingmargin 23.2 23.6 24.8 24.8 Taxes 66 455 431 504cost TW21T75T TS9139.5 Retallprice 275.7 180 200 190 SCi incoombefore Incometax 81.5 3.6 17.1 49.2 a/ Sae detailed price structureIn Table 7. Source: SC0. - 7- Annex2.1 Page 5 of 6

Table 6: SCHSTORAGE CAPACITY AND AUTONOMY

Storge apacity 1965Congueptlon Autonomy (ir-) (days)

Moroni: gasoline 1,800 5,050 130 gasoil 2,000 5,700 128 kerosene 1.200 2,850 153 Total 5,000 13,600 134

Mutsauundu: gasoline 2,000 1,070 682 gasoll 3,000 2,370 340 kerosene 1,000 680 536 Total 6,000 4,120 531

Source: SCHand mission estimates. August1985 June1966 Gasoline Diesel Kerosene Jet Gasoline Diesel Kerosene Jet U. c*i.f. 105 107 115 115 41.8 38.7 39.1 39.1 I

All othercosts (In. c.l.f.! 128.2 130.6 139.8 139.8 65,0 62*3 63.9 63.9

Taxes 66.0 45.5 43.1 0.0 40.1 31.1 20.3 0.0 sIn Subtotal 194.2 176.1 182.9 139.8 105.1 93.4 64.2 63.9

Margin 81.5 3.9 17.1 50*2 170.6 86.6 115.8 126.1 £

SellingPrIcs 275S7 180 200 110 275.7 180.0 200 190

Sellingprico/c.l.f. (S) 262.6 160.2 173.9 165.3 659.6 465.1 511.5 485.9

Taxes as % of c.l.f. 62.9 42.5 37.5 0.0 95.9 80.4 51.9 0.0

Note: Customsare ad valorembut road levyand TurnovorTax are specific.

Gasoline Diesel Kerosene Jet

Customs 41% 21% 29.9% 0%

Source: Comorianauthorities, SCH, Customs.

Q0. -79 - Annex 3.1 Page 1 of 41

LOWG RUM NARGINAL COSTS (LNC) OF LJCTRIC POVR

In para 4.5, a usable demand forecast for Grande Comore and Anjouan was presented. Besides a Base Scenario, several alternative scenarioswere devised to assess the influenceof different parameterson the load projections and consequently,on investment requirements and expansion plans. As summarized in Table 3.2, demand requirementsand, therefore, installed capacity may differ significantlydepending on the scenario. In 1995, the difference in Crande Comore between the system peaks (at the generator terminals) for the two extreme scenarios is 1,197 kW, for a system peak of 4,757 kW in the Base Case (a range of approximatelyplus or minus 15%). The correspondingvalues for Anjouan, in the same year, are 550 kW--for the difference between extremes--and 1,616 kW--for the peak in the Base Case (a range of plus or minus 17%).

The optimum timing for the commissioning of new generating units and thus the least-costgeneration expansion plan is strongly dep- endent on the actual load growth rates. Before going into a more detailed analysis of alternative options for the expansion plan, LRMC will be calculated using demand projectionsof Base Case and the minimum generation investments required to supply such demand with a certain reliability level. The situation in the Comoros, with several small inland centers with very low .evelsof demand and unknown demand growth trends only justifies the LRMC estimation for Grande Comore (system supplied from Voidjou) and Anjouan (future interconnectedsystem of Mutsamudu and Domoni). The values will also serve for a comparison between the accountingapproach naed by EEDC in designing its tariffs and the LRMC approach.

Demand and Supply Expansion

Peak demand at each voltage level, for the Base Case, is summarized in Tables 8 and 9. Peak demand at each higher voltage level is estimated by adding the system losses and consumer demand drawn off directly at the lower voltage level. Losses are presented as a percentage of incoming power and a distinction is made between annual average losses and peak losses (losses at the time of system peak, which occurs between 18hOO and 22hMN). Case 5 ir Grande Comore is a modifica- tion of the Base Case which assumes that a loss reduction program would be progressivelyimplemented between 1989 and 1994. The details of such a program and its extensionneed to be studied and should be the subject of a technicalassistance activity but, taking into account the low power factor measured in Grande Comore (and most probably also in Anjouan), the low load factors at all voltage levels (leading to a low utilization factor of the generating capacity), and the likely natural worsening of these load factors following the connection of new residential clients with loads concentratedin the peak periods, there is no doubt that the installationof shunt power capacitors (up to a level to be determined) is a least cost option and a way of postponingnew generatingcapacity. - 80 - Annex 3.1 Page 2 of 41

A summary of average and peak loss factors for Grande Comore and Anjouan between 1987 and 1995 is given in Table 12, which shows the influenceof a possible loss reduction program in Grande Comore. For the calculation of LRMC, however, the Base base without loss reduction program was assumed.

The projecteddemand of the Base Case was comparedwith current available capacities in both islands to determine the latest dates at which new capacity should be commissioned. The planning guideline for this comparison was that the system should be able to meet the mission's projection of demand with a securitymargin equivalent to the loss of the largest machine. The alternative of using a certain percentage (20% or 30%) of total installedcapacity was disregardeddue to the small number of machines in each system and the high rating of the largest machine compared to the total installed capacity. The chosen reserve margin criterion -naynecessitate the commissioningof new units earlier than a less strict criterion,with lower reliabilitystandards. However, it was also assumed that all the installed units would have their rated output available during the whole study period, which, according to past experience,will hardly be the case in the Comoros. 1/ Tables 12 and 13 compare demand projectionsand generation requirementsfor Grande Comore and Anjouan in three scenarios: Low, Base, and High. The impact of the scenario on the earlier or later commissioningof new units is apparent.

A basic assumption for Grande Comore was that unit 5, of 1,800 kW, whose installationhas been decided by EEDC, would come on-line by late 1988. In the Low Scenario, no further units would be needed until 1997, although the three units installed in 1978, with a total of 2,400 kW, would have largely expended their useful lifetime. In the Base Scenario, a new unit would be needed by 1993 and merely for computation of LRMC it has been rated at 1,800 kW. In the High Scenario, this same unit would be required one year earlier. For the three scenarios, a full replacementof the three older units would take place in 1993, replacing 2,400 kW without any increase in total installedor firm capacity.

Assumptions for Anjouan were that the new plant at Mutsamudu would come on line by the end of 1988 with 2 x 640 = 1,280 kW, together with the interconnectionof Mustsamudu and Domoni via an 18 km long, 20 kV line. EEDC would then start operating the plants of Mutsamudu and Domoni in parallel, postponing the installation of the third unit at Mutsamudu until 1990 (in the Base and High Scenario) or until 1991 (in the Low Scenario) as the 424 kW installed in Domoni would stand as reserve for the entire system. The very high costs of the new units

1/ The need to carefullycollect data on total unavailablehours due to scheduled repairs and maintenance and to forced outages, for each unit, should again be emphasized, as an invaluable element to determine the true impact of additional capacity in the effective load carrying capacity of the system. - 81 - Annex 3.1 Page 3 of 41

strongly recommend taking advantage of the sunk costs of the generation capacity in Domoni (units installed in 1986) and gain two to three years in the coummissioningdate of the third unit. Additional capacity would not be required until 1999 in the Low Scenario. The Base Scenario would require new capacity in 1997 and the High Scenario in 1995. The experience gained in parallel operation of Mutsamudu and Domoni since 1989 would enable, at those later dates, the parallelingof new plants which could be the rehabilitatedhydro plants at Marahani (225 kW) and Tatinga Superieure (120 kW), with a total of 345 kW and whose economic attractiveness versus equivalent diesel plants has been tentatively demonstrated.2/

Numerous assumptions regarding unit investmentcosts in MV and LV distribution,discount rates, useful lifetimes, and O&M costs were made for LRMC calculations. To enable an easy appraisalof the influence of such assumptionson the final costs and a better design of tentative tariff structures,the structuringof costs is divided according to:

(a) Different systems (Grande Comore and Anjouan).

(b) Different categories of costs (capacity, operation and maintenance,and energy).

(c) Differentvoltage levels (generation,MV, and LV).

(d) Differenthours of the day (peak and off-peak).

Planned additionsto the system in the short-termalready decided by EEDC were considered with investment costs proposed by the utility. Such investmentsare listed in Table 14 and, for generating equipment and MV distributionlines, are higher than similar installationsin countries in the same region. Calculationsare carried out in constant 1986-87CF, discounted to 1987 and using, for purposes of comparison, an exchange rate of US$1 = CF 330. A period of nine years, between 1987 and 1995, is used for the calculations.

Long Run Marginal Costs - Grande Comore

GenerationCosts

The LRMC for Grande Comore are calculated from peak capacity and energy costs using demand projections correspondingto Base Case. All costs (as well as peak demands) are adjdusted for losses down to the point of delivery to consumers. Capacity costs per kilowatt are converted to annual costs per kilowatt by annuitizingover the lifetime of the equipment. All new units are diesel fueled so that no practical

2/ Annex 3.2. - 82 - Annex 3.1 Page 4 of 41

difference exists between capacity costs of base-load and peak-load units. Generation capacity costs are summarized in Table 15. Rehabilitationof units 1, 2, and 3 was included and considered to restore the correspondingrated output. Main assumptionsused were:

Lifetime of rehabilitatedunits 7 years Lifetime of new units 10 years Discount rate 12% O&M for new units 5% of the investments, annually Investmentcosts for replacing units 1, 2, 3 US$600/kW

Operation and maintenance (OEM) costs associated with the power plant are also calculated and charged to capacity costs. Besides increases required by the new units, an increase of CF 5 million was consideredin 1988 to allow for additionalpersonnel and other facilities needed in the plant. Annuitizedgeneration capacity costs are summarized in Table 16. Annual OEM costs were calculated using total discounted incremental costs and total discounted peak load increments (at the generatorlevel) during the period.

DistributionCosts

Generally, all distribution investment costs, both MV and LV, are allocated to incrementedcapacity since the network design is deter- mined principally by the peak kilowatts that it carried rather than by the kWh. Present (1987) discounted values of incremental demand and investment at the three voltage levels--generation,MV and LV--were computed according to demand projections and assumed distribution reinforcement and expansion plans. Calculations are shown in Table 17. 3/ Assumptionsused were as follows:

(a) Constant annual investment in MV network equal to CF 4.95 million (US$15,000).

(b) Annual investmentsin LV network proportionalto LV peak demand increment, at a constant specific investment of US$600/kW (CF 198,000/kW).

(c) Lifetime of MV and LV networks: 30 years

(d) Discount rate: 12%

3/ Calculationsare shown for discount rates of 10%, 12%, and 15%. - 83 - Annex 3.1 Page 5 of 41

Investment assumptionsare rather arbitraryand should be corrected with more detailed informationfrom EEDC. Low investmentsin MV networks are expected, as the main structure of such networks will be completed by early 1987, with the comissioning of a new feeder under construction. An allowance was made only for very small extensions. The specific value used for LV distribution should be checked with EEDC experience and converted into different figures according to the type of area covered (new consumers in a densely electrified area or in rural areas will impose very different specific costs). O&M costs per year were set at 5X and 7Z of the MV and LV average incremental distribution costs, respectively,during the period 1987-1995. Average incrementalNV and LV capacity costs are respectivelyCF 22,267/kWand CF 198,000/kW.

A summary of incremental and annuitized generation and distributioncosts (both capacity and O&N) is shown in Tables 18 to 20. The structure per type of cost and voltage level permits a quick identificationof major componentsof final costs. At the LV level, peak capacity costs amount to CF 205,340/kW/yearand O&M costs amount to CF 60,040/kW/year. Those values include investmentsas well as O&1 in generation and distribution and take into account losses at own and higher voltage levels. Peak loss factors play an important role in the propagation of capacity costs from generation to LV consumers. A capacity cost of CF 126,590/kW per year, at the generator terminals, rises to CF 177,510/kW per year at the LV client due to plant and distribution losses. O&M costs, at the LV level, represent 29X of capacity costs at the same level.

Energy Costs

During the whole period, until 1995, diesel units are used throughoutthe year to meet energy requirements. Any incrementalenergy, irrespectiveof time of day or of year, will involve increased diesel generation. Assumptionsused for marginal energy costs calculationsare stated in Table 21. Economic cost of CF 90/liter for diesel oil was used. 4/ Specific consumptionof 0.280 kg/kWh assumed certain improve- ments in present operation of Voidjou power plant, although this value could be further reduced. Energy costs, at LV level, are CF 44.07/kWh (peak) and CF 39.75/kWh (off-peak)up from CF 31.43/kWhat the generation level. The difference between peak and off-peak costs is simply due to the different loss factors (according to time of day) both in the MV and LV distributionnetworks.

4/ Average price paid by EEDC to SCH was CF 140.15/literin 1985. - 84 - Annex 3.1 Page 6 of 41

Calculationof LRMC

Calculations of strict LRMC are summarized in Table 22. Consumers at MV and LV levels only bear the burden of upstream incrementalcosts. Different loss factorswere used according to voltage level and period (peak and off-peak) as stated in Table 12. Total equivalent costs per kWh, combining capacity and energy costs, are also calculated. Simultaneityfactor at peak was assumed equal to 0.85 for MV loads (MV load at time of system peak is only 85Z of MV own peak demand). Own load factors for MV and LV were assumed equal to 0.43 which is the average system load factor in the period. Total costs (capacity+ O&M + energy) on an energy-equivalentbasis, are CF 79.70/kWh for MV consumers, and CF 110.20/kWh for LV consumers, during off-peak periods, which is below the current tariff of CF 120/kWh.

It is apparent chat "energy equivalent" capacity costs are predominant over purely energy costs at both voltage levels but more at LV (CF 70.45/kWh) than at MV (CF 45.53/kWh). Energy costs at peak and off-peak show very small differences. Capacity costs at generation,MV and LV levels are estimated at CF 13,216/kW per month, CF 16,074/kW per month and CF 22,115/kW per month, respectively. The major reasons for such big differenceare:

(a) Peak losses in the LV network.

(b) Very low investments in the MV network and regular annual investmentsin LV during the period.

(c) High O&M costs in the LV network, which are borne only by LV consumers.

Capacity costs at the generation and MV level show that MV costs are nearly 22Z higher than generatingcosts. The calculationcould serve--bothfor EEDC and the new hotel to be built in Mitsamiouli--asa means of appraisingattractiveness and adequacy of a captive diesel plant to supply the hotel instead of a supply from the grid. Postponementof unit 5 in Voidjou is not possible due to the present lack of any reserve margin at the plant and the uncertainty about the outputs, after rehabilitation,of units 1, 2, and 3, but its rated capacity can be lower if the hotel is not supplied from the grid or has its own peak load captive plant (for peak supply during six hours per day).

Long Run Marginal Costs - Anjouan

Similar calculationswere carried out for Anjouan with similar basic assumptions. The generation expansion plan until 1995 is limited to the building of a new plant in Mutsamudu, starting with 2 x 640 kW units and retiring the existing plant. Through a 20 kV distribution line, the plants of Mutsamudu and Domoni would be installed in order that they could be paralleled. Otherwise it would be recommendedto transfer - 85 - Annex 3.1 Page 7 of 41

the two Domoni units to the new plant of Mutsamudu, in order to postpone the commissioningof the third unit until 1990. Reliability conditions for Domoni, in case the transfer is carried out, would not be worse than those that EEDC is offering to the new hotel in Mitsamiouli,at the end of a 30 km long feeder of 20 kV.

LRMC in Anjouan are much higher than in Grande Comore. The replacementof the biggest plant and the building of a 20 kV line, at an estimated cost of almost twice normal costs even under difficult conditions (US$54,000/km in Comoros against typical values of US$30,000/km) impact drastically on capacity costs, inasmuch as the approximate investment of US$4.8 million is not required to meet an extraordinaryconsumption rise or the connection of an individuallarge consumer but simply to supply a load growth lower than 9Z p.a. in the best scenario, correspondingto annual incrementsin peak demand of 120 kW. Values calculatedfor the LV level show that capacity costs amount to CF 518,840/kWper year. The structureof such costs is as follows:

103CF/kW Z

Generation (capacityand O&M) 206.83 39.9 Plant and MV losses 41.16 7.9 MV investments(and O&M) 150.74 29.1 LV losses 81.67 15.7 LV investments(and O&M) 38.44 7.4 Total 481.84 100.0

Source: Mission estimatesand computations.

It can be seen that nearly 70Z of capacity costs at the LV level come from investments (and O&M) at the generation and MV level, with 29X from investments in the MV network. With a lower load factor than in Grande Comore--0.35 against 0.43--the high capacity costs in Anjouan translate into CF 169/kWh. Adding CF 39.41/kWh from energy LRMC (calculatedwith an economic cost of diesel oil of CF 90/liter) a value of CF 211/kWh is obtained, 75X higher than the present tariff and unrecoverableeven with acceptabletariff increases.

These values, although based on premises that require further checking, strongly recommendthat EEDC and the Governmentreview urgently and carefully the minimum indispensableinvestment needs in Anjouan and reappraise in detail the itemized costs of the major investmentsin the generatingplant of Mutsamudu and in the 20 kV line. As an example, the reduction of the cost of the line from CF 340 million to CF 200 million would reduce the capacity LRMC at the LV level by lOZ. Another 86 - - Annex 3.1 Page 8 of 41

conclusion,also valid for Grande Comore, is that high costs of electricityore mostlydue to bad load factors,ise., to the existenceof an excessiveinstalled capacity, imposing high depreciationcharges and remainingidle for most of the year. Any actionsthat improvethe load factor,like peak demandcharge for NV consumersor peak shavingthrough maximumload limitersfor LV consumersare thereforerecomended. In Table 3.8, a ser'itivityanalysis of distributioncapacity costs is presentedfor CrandeComore and Anjouan,using discount rates of 10 and 15X, demand projectionscorresponding to the Low and High Scenariosand, in the case of Anjouan,a reductionof 402 in the 20 kY line cost and a higher specificinvestment cost in the LV networkof US$1,000per incrementalpeak kW. annex3.1 Page 9 of 41

Table 1: COMM - RACE COWIE, ANJOW AND FELI ELECTRICITYSUPPLY AND CEWMD (1983-1965)

Growth 1963 1914 1965 S p.a.

Gross generatIon (011) 9,203 10,350 12,062 14.5 Sales (GMb) 6,223 6,715 7,659 10.9 Peak Demand1/ (MN) 2,290 2,520 3,155 17.4 Losses 2/ (01h) 2,960 3,635 4,403 21.6 Losses (m) 32.4 35.1 36.5 - Number of Consumers 4,563 5,329 6,160 16.2 Annual consumptionper consumer (kWh) 1,364 1,260 1,243 -4.5

I/ With no allovencefor diversityand assumingslouItaneous peak demand In tho three Islands. 2/ Includesconsumption of EEOC personnot,street lighting,water pumping and theft.

Source: EEDC Annual Reports: 1963, 1964, 1965, - 88 - Annex 3.1 Tables Page 10 of 41

Table 2: ANJOUAN - POER PLANTSMUTSANIUD AND DOMONI ELECTRICITYGENERATION, SALES, PEAKDEMWND ANDNUNER OF CONSUERS

1983 1964 1965 1983-65

Generation (1Uh) 1/ 1,652 1,880 2,400 Sales (MUh) 1,168 1,304 1,433 Losses (MWh) 484 576 967 percentage of Generatlon 29.3 30.6 40.3 Peak Deand (kW) 2/ 580 650 800 Load Factor 3/ 0.33 0.33 0.34 Number of Consumers 4/ 1,663 1,804 1,947 Annual Consumption per consumer (kWh) 702 723 736

Average: Growth Rate p.a. (percentage) Generation - 13.8 27.7 20.5 Sales - 11.6 9.9 10.6 Losses - 19.0 67.9 41.3 Peak Demand - 12.1 23.1 17.4 Number of Consumers - 8.5 7.9 8.2

I/ Not clear If it is combined generation of Mutsamuduand Domoni or only Mutsamudu. 2/ Comblned peak of Mutsmudu (80%) and Domoni (20%), with no allowance for dIversity. 3/ Not reliable due to uncertainty of generation data. 4/ Combined value of Mutsamudu (77%) and Domoni (23S).

Source: EEDCAnnual Reports: 1983, 1984, 1985. - 89 - Annex 3.1 Tables Page 11 of 41

Table 3: MOMELI- POWER PLANT OF FOiMONI GEiERATION,SALES, PEAKDEiMD, AND NUMER OF CONSUMERS

1983 1/ 1984 1985 1983-85

Generation (NWh) 72.5 196.0 245.8 Sales (1Mh) 2/ 41.1 110.6 139.8 Losses 3/ (MWh) 31.4 85.4 106.0 Percentage Generated 43.3 43.3 43.1 Peak Demand (kW) 80 90 105 Load Factor 0.21 4/ 0.25 5/ 0.27 5/ Number of Consumers 235 305 415 Annual Consumption per consumer (kWh) 350 4/ 363 337

Average Growth Rate p.a. (S) Generation - 35.1 25.4 30.2 Sales - 34.5 26.4 30.4 Losses - 305.0 24.1 29.9 Peak Demand - 12.5 16.7 14.6 Number of Consumers - 19.8 36.1 32.9

1/ Plant came on I ne July 1983. 2/ Values In EEOCAnnual Reports do not coincide with values locally supplied by the Regional Direction. 3/ Includes consumption of EEOC personnel and street lighting. 4/ Assuming that annual generation and sales were times the measured values. 5/ Operating hours per day: 12 in 1983, 13 In 1984, and 16 in 1985.

Source: EEDCAnnual Reports: 1983, 1984, 1985. - 90 - A 3.1 Tables Page 12 of 41

Table 4: EEOC- ASSUiEDSTiUCTU OF CONStWTION- 19U (Perc.ntag.)

Grand Caore Anjogan NOh6i

Generation 100.0 100.0 100.0

Sales 64.0 65.0 sl.0 EEDCpersonnel 3.5 3.5 12.0 Water pumping 4.0 - - Street lighting 3.0 3.0 10.0 Theft 2.5 2.5 1.0 Plant losses 9.0 S.0 6.0 Distributionlosss I/ 14.0 16.o 13.0.

I/ Technicallosses In lines and transformers.

Source: EEOCand Nission estimates. PrI vats Year Householaand Catm rcial Industry Administration Total

(NuMber) (Wh) (S) (Number) (IWh) (S) (Number) OMh) (S) (Nusmr) (ISh)

GrandsCowmro

1983 2464 2750 54.8 56 908 16.1 145 1356 27.1 2665 5014 1964 3017 3130 59.0 55 952 18.0 146 1218 23.0 3220 5300 1985 3579 3674 60.4 58 1084 17.8 161 1328 21.8 3796 6066 I 1986 2/ 3763 2077 63.3 41 536 16.3 159 670 20.4 3963 3263

Anjouan

1983 1598 824 70.5 10 96 8.2 55 248 21.2 1663 1166 3 1964 1739 999 76.6 10 80 6.1 55 225 17.3 1804 1304 I 1985 1870 1050 73.3 12 107 7.5 65 276 19.2 1947 1433 3 19662/ 1918 637 74.4 12 54 6.3 65 165 19.3 1995 856

Moh6Ill

19833/ 217 35 85.4 3 0.5 1.2 15 5 13.4 235 41 1 2 1964 285 92 82.8 3 0.7 0.6 17 16 16.6 305 11,1 1985 395 116 82.6 3 3.1 2.2 17 21 15.2 415 140 19862/ 419 71 82.8 3 2.6 3.0 18 12 14.2 440 86 Q t 1/ Numbr at the end of the year. y/ Situationby June30, 1986. 3/ Consumptloncorresponding only to secondhalf of 1983.,

Source: EEDCand Mission estimates. S-o I-.

Grande Comore Anjouan Moh6li Total rn m (t4Wh) (5) (tMWh) (M) (NWh) (S) (NWh) (S) () 8

Total Generation 9,416 100.0 2,400 100.0 246 100.0 12.062 100.0 - m 0 Total Sales 6,086 64.6 1,433 59.7 140 56.9 7,659 63.5 100.0 Householdand Commercial 3,674 39.0 1,050 43.8 116 47.2 4,840 40.1 63.2 n Administration 1,328 14.1 276 11.5 21 8.5 1,625 13.5 21.2 I Industry t,084 11.5 107 4.4 3 1.2 1,194 9.9 15.6 F0

Total "Losses" 3.330 35.4 9A7 40.3 106 43.1 4.383 36.3 - Street Lighting1/ 285 3.0 70 2.9 24 9.8 382 3.2 - EEOC Personnel2/ 330 3.5 84 3.5 29 11.8 443 3.7 - Water Pumping 3/ 352 3.8 - - - - 352 2.9 - no Net Losses4/ 2,363 25.1 813 33.9 53 21.5 3,206 26.7 -

1/ EECS estimatesbased on numberof installedlamps. V/ EEDC estimates. m 3/ Pumping for public water supply in Moroni. 2 4/ Includestheft, plant losses,and distributionlosses.

Source: EEDC. ' P.w 0i*o

Ni 93 - Annex 3.1 Tables Page 15 of 41

Table7: EEDC- ELECTRICITYCONSUWTION AND GRPOWHRATES OY SECTOR (MWhand Percentage)

1983 1984 1985 1983-85

GrandeComore

Household(M4Wh) 2,750 3,130 3,674 Industry(MWh) 908 952 1,084 Administration(MWh) 1,356 1,218 1,328 Total (tM.h) 5,014 5,300 6,086

AverageGrowth Rate p.a. (Percentage) Household - 13.8 17.4 15.5 Industry - 4.8 13.9 9.3 Administration - -10.2 9.0 -1.0 Total - 5.7 14.8 10.2

Anjouan

Household(NWh) 824 999 1,050 Industry (MWh) 96 80 107 Administration (MUh) 248 225 276 Total(MWh) 1,168 1,304 1,433

AverageGrowth Rate p.a. (Percentage) Household - 21.2 5.1 12.9 Industry - -16.7 33.8 5.6 Administration - -9.3 22.7 5.5 Total - 11.6 9.9 10.8

Source:EEDC and Missionestimates. 94 - Annex 3.1 Tables Page 16 of 41

Tablo 8: GRANDE COMOR- CASE 1 DEMANDAND LOSSFORECAST AT TIME OF SYSTEMPEAK

LV NV Peak Cons. Dead LV -V Syst Annu Peak LV Norm 1ig Peak WV Peak Plan Gene Load Year Grow Dead Loss Grow Cons Doed Loss Dead Loss Peak Fact Gener

% KM S KW KW KW S KW S KW NWh

1985 1,483 15 300 0 2,045 8 2,223 9 2,442 0.44 9,414 1986 7 1,587 15 321 0 2,188 8 2,378 9 2,613 0.43 9,844 1987 7 1,698 15 (332) 0 2,330 8 2,532 8 2,753 0.42 10,127 1988 7 1,817 15 (344) 300 2,781 9 3,056 8 3,322 0.42 12,222 1989 6 1,926 15 354 450 2,070 9 3,373 7 7 ,627 0.42 13,345 1990 6 2,041 15 365 560 3,346 9 3,677 7 3,954 0.43 14,894 MI91 6 2,164 15 376 580 3,501 9 3,848 7 4,137 0.43 15,584 1992 5 2,272 15 385 560 3,638 9 3,998 7 4,299 0.43 16,193 1993 5 2,386 15 395 560 3,781 9 4,155 7 4,468 0.43 16,830 1994 5 2,505 15 405 580 3,931 9 4,320 7 4,646 0.43 17,499 1995 3 2,580 15 411 580 4,026 9 4,424 7 4,757 0.44 18,336 1996 3 2,657 15 417 580 4,123 9 4,531 7 4,872 0.44 18,779 1997 3 2,737 15 423 580 4,223 9 4,641 7 4,990 0.44 19,234 1998 3 2,819 15 429 580 4,326 9 4,754 7 5,112 0.44 19,703 1999 3 2,904 15 436 560 4,332 9 4,870 7 5,237 0.44 20,186 2000 3 2,991 15 442 580 4,521 9 4,990 7 5,366 0.44 20,682

Annu a Annual Cons a Consumer Dead a Demand Gener a Generation Grow a Growth LV a Low Voltage MV a Medium Voltage Norm a Normal Syst a System Annex 3.1 Tables Page 17 of 41

Tablu 9: ANJOUiAN- CASE 1 DEMKVAND LOSS FORECAST AT TUIE OF SYSTEMPEAK

LV Peak MY Dead LV Peak Syst Annu Peak LV Dead WV Peak Plant Gener Load Year Grow Dead Loss MV Loss Deed Loss Peak Fact Goner

5 KW S KW S KW S KW WKh i985 - 598 17 720 10 800 8 870 0.30 2,286 1986 2 610 17 735 10 817 8 888 0.30 2,234 1987 1 616 17 742 10 824 8 896 0.30 2,355 1988 1 622 17 749 10 832 8 904 0.30 2,376 1989 15 715 17 861 10 957 7 1,029 0.35 3,155 1990 8 772 17 930 10 1,033 6 1,099 0.35 3,370 1991 8 834 17 1,005 10 1,117 6 1,188 0.35 3,642 1992 8 901 17 1,086 10 1,207 6 1,284 0.35 3,937 1993 8 973 17 1,172 10 1,302 6 1,385 0.35 4,246 1994 8 1,051 17 1,266 10 1,407 6 1,497 0.35 4,590 1995 8 1,135 17 1,367 10 1,519 6 1,616 0.37 5,238 1996 5 1,192 17 1,436 10 1,596 6 1,698 0.37 5,504 1997 5 1,252 17 1,508 10 1,676 6 1,783 0.37 5,779 1998 5 1,315 17 1,584 10 1,760 6 1,872 0.37 6,068 1999 5 1,381 17 1,664 10 1,849 6 1,967 0.37 6,375 2000 5 1,450 17 1,747 10 1,941 6 2,065 0.40 7,236

Annu a Annual Dead a Demand Gonera Generation Grow a Growth LV - Low Voltage MV - MediumVoltage Syst a System - 96 - Annex 3.1 Tables Page 18 of 41

Table10: ALTERNATIVEDEMAND FORECASTS (1995 AND 2000) I/

System Peak2/ GenerationRequirements (kW) (MWh) 1995 2000 1995 2000

GrandeComore

Case 1 - Base Case 4,757 5,366 18,336 20,682 Case2 - High 5,258 6,446 20,265 24,846 Case3 - Low 3,812 4,128 14,692 15,911 Case 4 - High 5,055 5,706 19,484 21,994 Case 5 - Base/Low 4,535 5,112 17,480 19,703 Case6 - High 5,009 6,135 19,308 23,646 Case 7 - Low 4,247 4,604 16,370 17,746

Anjouan

Case 1 - Base Case 1,616 2,065 5,238 7,236 Case2 - High 1,770 2,506 5,737 8,781 Case3 - Low 1,462 1,831 4,739 6,416 Case 4 - Base/Low 1,526 1,949 4,946 6,829 Case 5 - High 1,757 2,244 5,695 7,863 Case6 - High 2,012 2,568 6,521 8,998

1/ DefinitIonof differentcases is given In text. DetaIlson results are given in Annex3.5 (Tables1 though13).

2/ Systempeak at the generatorlevel Including plant auxiliaries.

Source: Missionestimates. Annual Losses1/ Consump. Av*riae Annual Growth Rate Sof Peak Load No. of per Peek No. of Losses Demand Consum Year Gener Sales Gene Demand Factor Consum Consumer Gener Sales

IMWh) (WMh) (MWh) (k) (kW)

- - - m 1970 1,800 1,504 296 16.4 - - 793 1,896 - - - 16.0 ¢ 1971 2,'17 1,840 277 '3.1 - - 920 2,000 17.4 22.3 -6.4 -3.2 - 14.6 _ 1972 2,643 2,375 268 10j1 445 0.68 1,054 2,253 24.8 29.1 42.1 7.9 9.2 1973 2,926 2,545 381 13.0 480 0.70 1,151 2,211 10.7 7.2 37.8 54.0 7.S 1974 3,316 2,791 525 15.8 739 0.51 1,237 2,256 13.3 9.7 -1.5 3.0 6.4 1975 3,607 3,090 517 14.3 761 0.54 1,316 2,348 8.8 10.7 -10.3 0.0 6.0 ' 1976 3,412 2,948 464 13.6 761 0.51 1,395 2,113 -5.4 -4.6 -3.2 7.2 -0.5 A 1977 3,830 3,381 449 11.7 816 0.54 1,388 2,436 12.2 14.7 -0.2 34.8 19.5 19782/ 4,078 3,630 448 11.0 1,100 0.42 1,659 2,188 6.5 7.4 11.8 19793/ 5,509 1,230 0.51 35.1 13.8 ' 1980 6,203 1,400 0.51 12.6 3.6 M 19814/ 6,946 1,450 0.55 12.0 13.8 19825/ 6,416 1,650 0.44 -7.6 -1.2 id 19836/ 7,479 5,014 2,465 33.0 1,630 0.52 2,665 1,881 16.6 20.6 9.2 20.8 1984 8,274 5,300 2,974 35.9 1,780 0.53 3,220 1,646 10.6 5.7 12.0 26.4 18.0 1985 9,416 6,086 3,330 35.4 2,250 0.48 3,798 1,610 13.8 14.8

AverageGrowth Rate p.o. (S8 5.3 16.2 9.7 fi 1970-78 10.8 11.6 - - 10.6 - 1979-85 9.3 16.2 17.5 19.4 1983-85 12.2 10.2

1/ Lossesinclude "unaccounted for" energyand theft. 2/ The Voldjouplant enteredIn operationin June 1978. First year of annualsupply from VoidJou. 3/ *-cr 4/ 51 percentIncrease in tariffson 1.10.81. 5/ 19 percentIncrease In tariffson 1.5.82. 6/ 15 percentincrease In tariffson 1.1.83. relatifs au Source: EEDC. Annual Reports: 1983, 1984, 1985; EDF: "Mission d'ldentificationdes Problies O6veloppementde l'Electrificotiondons l'Archipeldes Comores",January 1979. Annex 3.1 Tables -98- Page 20 of 41

Table 12: AVERAGEAND PEAKLOSS FACTORS FOR EiNERGYAND POWER (S of incoming)

GrandeComore

WithoutLoss ReductionProgram With LossReduction Program PlantUse MV DistributionLV Distribution MV DistributionLV Distribution Year Average Peak Average Peak Average Peak Average Peak Average Peak

1987 8.0 8.0 5.0 8.0 9.0 15.0 5.0 8.0 9.0 15.0 1988 8.0 8.0 6.0 9.0 " 6.0 9.0 9-0 15.0 1989 7.0 7.0 n 6.0 9.0 9.0 15.0 1990 6.0 9.0 9.0 15.0 1991 nif n 5.5 8.0 9.0 14.0 1992 n n n 5.5 8.0 9.0 14.0 1993 n 5.5 8.0 8.0 13.0 1994 n 4.5 7.0 8.0 13.0 1995 4.5 7.0 8.0 12.0

Average1987-1995 () 7.2 7.2 5.9 3.9 9.0 15.0 5.4 8.1 8.7 14.0

Anjouan

PlantUse MV Distribution LV Distribution Year Average Peak Average Peak Average Peak

d d d d d d 1987 8.0 8.0 6.0 10.0 12.0 17.0 1988 8.0 8.0 6.0 10.0 12.0 17.0 1989 7.0 7.0 6.0 10.0 12.0 17.0 1990 6.0 6.0 6.0 10.0 12.0 17.0 1991 6.0 6.0 6.0 lO. 12.0 17.0 1992 6.0 6.0 6.0 10.0 12.0 17.0 1993 6.0 6.0 6.0 10.0 12.0 17.0 1994 6.0 6.0 6.0 10.0 12.0 17.0 1995 6.0 6.0 6.0 10.0 12.0 17.0

Average1987-1995 (S) 6.6 6.6 6.0 10.0 12.0 17.0

Source: Missionestimates. Peak Demand at Generation Total Capacity Low Base High Low Scenario Base Scenario High Scenario Year Scenario Scenario Scenario Installed F-Im3/ Installed Firm3/ Installed Firmo/

- (kg) ------(kW) ------

1987 2,654 2,753 2,753 4,200 4/ 2,400 4,200 4/ 2,400 4,200 4/ 2,400 I 1988 3,094 3,322 3,322 6,000 5/ 4,200 6,666 5/ 4,200 6,000 i/ 4,200 1989 3,306 3,627 3,655 6,400 4,200 6,666 4,200 6,000 4,200 1990 3,555 3,954 4,012 6,400 4,200 6,666 4,200 6,000 4,200 1991 3,596 4,137 4,230 6,400 4,200 6,666 4,200 6,000 4,200 A 1992 3,681 4,299 4,462 6,400 4,200 7,800 6/ 6,000 7,800 6/ 6,000 -s ° 1993 3,736 4,468 4,710 (2,400) 7/ 4,200 (2,400) 7/ 6,000 (2,400) 7/ 6,000 1994 3,784 4,646 4,975 2,400 4.200 2,400 6,000 2,400 6,000 1995 3,812 4,757 5,258 2,400 4,200 2,400 6,000 2,400 6,0000I 1996 3,873 4,872 5,473 2,400 4,200 2,400 6,000 2,400 6,000 1997 3,935 4,990 5,700 2,400 4,200 2,400 6,000 2,400 6,000

Average Growth p.a. (S) 4.02 6.13 7.55

1/ Distributionsystem supplied from VoidJouplant. V/ Capacityvalues assumeno deratingof units. 3/ Availablecapacity with the loss of the largestmachine. 0 a 4 4.2 MN a2x 0.6 1 xK1.241 x 1.8M.NW, S/ Unit nr. 5 of 1.8 NW In Voidjou plant,coming on stream In 1988, 6/ Unit nr. 6 of 1.8 NW. 7/ Replacementof 2.4 MW- 2 x 0.6 + I x 1.2 NW, Installed In 1978.

Source:Mission esttIates. Peak Demandat Generation Total Capacity Low Base High Low Scenario Base Scenario High Scenario Year Scenario Scenario Scenario Installed Firn3/ Installed Flrm3/ Installed FIru3/

------(kW) ------(kW) ------… - --

1987 896 896 896 1,704 4/ 1,064 1,704 4/ 1,064 1,7044/ 1,064 1988 904 904 904 1,704 1,064 1,704 1,064 1,704 1,064 1989 985 1,029 1,029 1,704 1,064 1,704 1.064 1,704 1,064 1990 1,052 1,099 1,140 1,704 1,064 2,344 5/ 1,704 2,344 5/ 1,704

1991 1,136 1,188 1,254 (2,344)5/ 1,704 1,704 1,704 2,344 1,704 - 1992 1,216 1,284 1,380 2,344 1,704 1,704 1,704 2,344 1,704

1993 1,301 1,385 1,503 2,344 1,704 1,704 1,704 2,344 1,704 _ o 1994 1,380 1,497 1,639 2,344 1,704 1,704 1,704 2,344 1,704 1995 1,462 1,616 1,770 2,344 1,704 1,704 1,704 new unit - 1996 1,535 1,698 1,912 2,344 1,704 1,704 1,704 new unit -

1997 1,613 1,783 2,045 2,344 1,704 - - new unit - -

Average Growth p.a. (Wi) 6.06 7.12 8.60

1/ Interconnectedsystem of Mutsamuduand Dooni. 2/ CapacItyvalues assumeno deratingof units. at, 3/ Availablecapacity with the lossof the largestmachine. 4/ 1,704 kW a 2 x 640 (Mutsamudu)+ I x 224 (Domoni)+ I x 200 (Domoni). o 5/ Unit nr. 3 of 640 kW in Mutsamudu. .4,

Source: Mission estimates. - 101 - Annex 3.1 Tables Page 23 of 41

Table15: SHORT-TERMINVESTMENT PLAN OF EEDC

Investment Commissloning (millionCF) Date

GRANDE00MRE

Generation

Rehabilitationunits nr. 1, 2, 3 90 1987 Unit nr. 5 (1,800kW) 690 1968 Civilworks In Voidjouplant 40 1988 Truckfor fueltransportation 200 1988 Engineering 50 1987-88 Sub-total 1,070

Distribution

Equipment 100 1987 Vehicles 100 1987 Sub-total 200

Contingencies 50 -

Total 1,320 (USS4.00million)

ANJOUAN

Generation

Infrastructurenew plantMutsamudu 70 1987 CivilEngineering new plant 280 1988 3 units (3 x 640 kW) with auxiliaries 655 1988 Engineering 70 1987-88 Sub-total 1,075

Distribution

Line at 20 kV Mutsamudu-Bambao(18 km) 320 1988 TransformersMV/LV 20 1987 Equipmentfor LV distribution 100 1987 Engineering 25 1987-88 Sub-total 465

Contingencies 40 -

Total 1,580 (USS4.79million)

Source: EEDC. Rehab Replace DiscountedInvestment & Incr mental O04 Units Unit Unit units 1OU4 Disc Rehab Reploc 1,2,3 5 6 1,2,3 Total Incr Factor Units Unit Unit units I/ 2/ 3/ 4/ 5/ 6/ 7/ 1,2,3 5 6 1,2,3 0ON

1986 0 0 0 0 80 0 1987 90 350 0 0 80 0 1.000 90.00 350.00 0.00 0.00 0.00 1 1988 0 350 0 0 85 5 0.893 0.00 312.50 0.00 0.00 4.46 2 1989 0 0 0 0 120 35 0.977 0.00 0.00 0.00 0.00 27.90 3 1990 0 0 0 0 120 0 0.712 0.00 0.00 0.00 0.00 0.00 4 1991 0 0 300 0 120 0 0.636 0.00 o.00 190.66 0.0O 0.00 5 1992 0 0 300 0 150 30 0.567 0.00 0.00 170.23 0.00 1.02 0 6 1993 0 0 0 475 150 0 0.507 0.00 0.00 0.00 240.65 0.00 7 1994 0 0 0 0 150 0 0.452 0.00 0.00 0.00 0.00 0.00 _ 8 1995 0 0 0 0 150 0 0.404 0.00 0.00 0.00 0.00 0.00

Total Disc. Investments(1987-1995) (Million CF) 90.00 662.50 360.88 240.65 49.35 -

1/ Estimatedvalue by EEDC. I * 0.12 annuitycapacity. y/ 1,800 kW at USS1,180AkW. Rehabil.1, 2, 3 - 7 years,0.219117 2400 kW. 3/ 1,800 kW at USSl,010/kW. New unit 5 - 10 years,0.176964 1800 kW. 4/ Replacementof units 1, 2, 3: 2400 kW New unit 6 - 10 years.0.176984 1800 kW. at USS600/kW. Replaced 1, 2, 3 a 10 years, 0.1 10.I 5/ 0 &M for unitsNr.WS nd 6: 5% of Initialinvestment. 6/ Total 0 & M Includesalaries of new personneland administrationand 0 facilitIescosts. !V Discountrate of 12%. 4 I

BH -- 103 ~~Annex3.1 Tables - 103 - Page 25 of ;1

Table 17: 'AANDE COMORE - CALCUIATIONOF GENKERATIONCAPACITY COSTS

a) Units nr. 1, 2 and 3 1/ 90 x 10 CF 2,40O0kW -* 0.219118 - 8,217 CF/kW per year b) Unit nr, 5 2/

662.5 s 106 CP = 0.176984 65,140 CF/kW per year 1,800 kW c) Unit nr. 6 2/ 36u.90 x 106 CF 11,800kW C 0.176984 = 35,484 CF/kW per year d) New units 1, 2, and 3 2/ 240.65 x 106 CF 20400 kW x 0.176984 17,746 CF/kW per yeaT

*) 0 & N 3/ (period1987-1995)

discounted0 & M incremntal costs: 49.39 x 106 CF discountedpeak demand Incromints 1,543 kW 49.39 543 10 CF = 32,011 CF/kVper year

I/ Assuming a llfetlmeof 7 years for rehabilitatedunits and a discountrate of 12%. Annuity factor:0.219118. 2/ Assuminga llfetlmeof 10 years and a discountrate of 12%. Annuity factor:0.176964. 3/ There is no need for annuitization. The cost per kW per year Is calculatedusing total discounted Incrementalcosts and peak load Incremnts (at the generator level) In the period.

Source: Mission estimates. - 104 - Annex 3.1 Tibles Page 26 of 41

Table 18 GRANDE COMORE - BASE CASE CASE 1 - DISTRIBUTIONCAPACITY COSTS

Peak Demand Incremnt Plan Year Gener MV LV Gener MV LV MV LV (kW) (kW) (k0) (kW) (kW) (kW) (milii (milli CF) CF)

1985 2,442 2,045 1,483 1986 2,613 2,188 1,587 171 143 104 0 1987 2,753 2,330 1,698 139 142 111 4.95 21.99 1 1988 3,322 2,781 1,817 569 451 119 4.95 23.53 2 1989 3,627 3,070 1,926 305 289 109 4.95 21.58 3 1990 3,954 3,346 2,041 327 277 116 4.95 22.88 4 1991 4,137 3,501 2,164 183 155 122 4.95 24.23 5 1992 4,299 3,638 2,272 161 137 108 4.95 21.42 6 1993 4,468 2,781 2,386 169 143 114 4.95 22.49 7 1994 4,646 3,931 2,505 177 150 119 4.95 23.62 a 1995 4,757 4,026 2,580 112 94 75 4.95 14.88 9 1996 4,872 4,123 2,657 115 97 77 4.95 15.33 10 1997 4,990 4,223 2,737 118 100 80 4.95 15.78 11 1998 5,112 4,326 2,819 122 103 82 4.95 16.26 12 1999 5,237 4,452 2,904 125 106 85 4.95 16.75 13 2000 5,366 4,541 2,991 129 109 87 4.95 17.25

[ 10% 1,619 1,391 707 31.36 140.03 NPV (1987-1995)1 12% 1,543 1,327 667 29.54 132.15 1 15% 1,442 1,240 615 27.16 121.80

1 10% 1,883 1,573 852 40.11 168.65 NPV (1987-2999)1 12% 1,719 1,476 786 36.75 155.68 [ 15% 1,574 1,352 704 32.59 139.49

1 10% (CF/kW) 22,538 198,000 AIC (1987-1995)1 12% (CF/kW) 22,267 198,000 I 15% (CF/kW) 21,898 198,000

1 10% (CF/kW) 25,507 198,000 AIC (1987-2000)1 12% (CF/kW) 24,901 198,000 I 15% (CF/kW) 24,095 198,000

WPV Net Preseot Value : 0.10 AIC Average IncrementalCost I : 0.12 : 0.15 LVS/kW - 600 CF/S - 330 - 105 - Annex 3.1 Tables Page 27 of 41

Table 19: GRANDE COMOCE - SUS~ARY OF INCS£MENTALGENERATION AND DISTRIBUTIONCAPACITY AND 0 & M COSTS (1987-1995)

Discounted1/ Peak Average Annuitized Discountedl/ Demand Incrementa. Capacity O1M Investments Incremrnts Costs (AIC) Costs Costs

(MillionCF) (kW) (103CF/kW) (103CF/kW (103CF/kW) per year) per year)

Generation - - - 126.592/ 32.00 MV distrib. 29.54 1,327 22.267 2.76 4/ 1.113/ LV distrib. 132.15 667 198.000 24.584/ 13.863/

1/ Discountedat 12% discountrate (Table17). 2/ Annuitizedcosts corresponding to rehabilitationof units1, 2, 3, Investments In units5 and 6 In Voidjouand replacementof units 1, 2 and 3 (Table16). 3/ 0 & M costs (includingadministration and facilitiescosts) per year assumed equal to 5% and 7% of the MV and LV average Incrementalcosts (AIC). respectively. 4/ Assumingfor MV and LV networksa lifetimeof 30 yearsand a discountrate of 12%. Annuityfactor: 0.124144.

Source: Missionestimates. - 106 - Annex 3.1 Tables Page 28 of 41

Table 20: GRANE COMOE SUIDARY OF 0 & i 6ENERATION AND DISTRIBUTIONCOSTS (1987-1995)

(103 CF/kW er year)

Voltage MV LV level Generation distrib. distrib. Total

Generation 32.00 - - 32.00

MV level1/ 38.14 1.11 - 39.25

LV level 2/ 44.87 1.31 13.86 60.04

1/ iV cost * Generationcost / (1 - plant peak loss factor - MV peak loss factor), 2/ LV cost a MV cost / (1 - LV peak loss factor).

Table 21: GRANDECOMORE SUMMARY OF PEAK CAPACITYCOSTS (1987-1995)

(103 CF/kW per year)

Voltage MV LV Level Generation distrib. dlstrib. Total

Generation 126.59 - - 126.59

MV level 1/ 150.88 2.76 - 153.64

LV level 2/ 177.51 3.25 24,58 205.34

1/ NV cost * Generation cost / (1 - plant peak loss factor - MV peak loss factor). 2/ LV cost a MV cost / (1 - LV peak loss factor).

Note: Peak loss factors taken from Table '2 for period 1987-1995.

Source: Missionestimates. - 107 - Annex3.1 Tables Page29 of 41

Table 22: GRNDE COMOM- ENEPGYGENERATION COSTS CALCULATION

Aes.Aptlonss:

(a) Specificconsumptlon 0.28 kg/kWh (b) DieseI oil economic cost 90 CF/lIltr or 105.88 CFA/kg (c) Fuel cost per kWh generated 29.65 CF/kWh (d) Lubricants cost (6% fuel cost) 1.78 CF/kWh (e) Total generation costs 31.43 CF/kWh (f) Power loss factors (taken from Table 12)

Voltage Energy Costs (CF/kWh) Level Peak Off-Peak

--- (CF/kWh) - Generation 31.43 31.43

MV level 37.46 36,17

LV level 44.07 39.75

Source: Mission estimates. - 108 - Annex 3.1 Tables Page 30 ef 41

Table 23: GRANDECOMORE SUiMARY OF STRICTLRMC FOR CAPACITY AND ENERGY

Voltag CapacityCosts EnergyCosts Level Capacity 0 & M Total Peak Off-Peak

------(CF/kW/year)------(CF/kWh)---

Generation 126,590 32,000 158,590 31.43 31.43

MV level 153,640 39,250 192,890 37.46 36.17

LV level 205,340 60,040 265,380 44.07 39.75

Totalequivalent costs per kWh a

(Totalcapacity costs per kW per year x SF/IF x 8,760)+ (Energycosts).

SF u factorof simultaneity,assumed 0.85 for MV and 1.0 for LV (MV demandit time of systempeak assumedto be 0.85 of MV own peakdemind).

LF *own load factor (load factorwith respectto own individuel peakdemand) assumed to be 0.43 for bothMV and LV.

MV level: 192,890x 0.85 * 36.17 a 45.53+ 36.17 * 79.70 CFAWh (off-peak) 43 x 8,760

LV level: 265380 x 1.0+ 39.75 70.45+ 39.75 110.20CF/kWh (off-peak) 0.43x 8,760

Source:Mission estimates. Annex 3.1 Tables - 109 - Page 31 of 41

Table24: ANJOUAt- GENERATIONCAPACITY COSTS (millionCF)

DOscountodInvestments and Incremental Investments OUm OUW Units1/ Total Incre- Discounr Units Year I & 2 Unit 3 2/ 3/ 4/ mental Factor5/ 1 & 2 Unit 3 O08i

1986 - - 20 - - - - 1987 350 - 20 0 1.000000 350.00 - 0.00 1988 440 - 23 3 0.892857 392.86 - 2.60 1989 - - 45 22 0,797194 - - 17.54 1990 - 220 45 0 0.711M80 - 139.81 0.00 1991 - - 57 12 0.635518 - - 7.63 1992 - - 57 0 0.567427 - - 0.00 1993 - - 57 0 0.506631 - - o0o. 1994 - - 57 0 0.452349 - - 0.00 1995 - - 57 0 0.403883 - - 0.00

1987-1995 742.86 139.81 27.85

1/ 2 x 640 kWat USS1,040OkWplus civil works for the new plant. 2/ 1 x 640 kWat USSi040/kW. 3/ 0 & M for units1, 2, and 3: 5% of initialInvestment. 4/ TotalO&M includesalarles of new personnel. i/ Discountrate of 12%.

Source: Missionestimates. - 110 - Annex 3.1 Tables Page 32 of 41-

Table 25: ANJOUAN- CALCULATIONOF GENERATIONCAPACITY COSTS

a) Units nr. 1 and 2 11

742.86 K 106 CF x 0.176984 - 102,714CF/kW per year 1,280kV b) Unit nr. 3 11

139.81x 10&6CF a 0.176984 - 38,662 CF/kW per year 640 kMW - c) 0 & M 2i (period 1987-1995)

discounted0 & M incrementalcosts: 27.85 x 106 CP discsuntedpeak demand increments: 426 kV

27.85 x 106 CF - 65,452 CF/kW per year 426 kW -

1/ LifetIme10 years; discountrate 12%; annuity factor 0.176984. V/ There Is no need for annultizatlon. The cost per KW per year Is calculatedusing total discountedincremntal costs and peak load Increments(at the generatorlevel) In the perIod.

Source: Misslon estimates. - 111 - Annex 3.1 Tables Page 33 of 41

Table 26: ANJOiAN- DISTRIBUTIONCAPACITY COSTS

Peak ieand Incremnt Plan Year Genor NV LV 6or MV LV MV LV (kg) (kW) (kVl) (kV) (kW) (kV) (mlI I I (ml III Cf) CF)

1965 870 720 596 1986 6a6 735 610 18 15 12 0 1987 896 742 616 8 7 6 170.0 1.19 1 1988 904 749 622 8 7 6 170.0 1.19 2 1969 1,029 861 715 125 112 93 0.0 18.41 3 1990 1,099 930 772 70 69 57 0.0 11.29 4 1991 1.168 1,005 834 89 75 62 0.0 12.28 5 1992 1,284 1,086 901 96 81 67 0.0 13.27 6 1993 1,385 1,172 973 101 86 72 0.0 14.26 7 1994 1,497 1,266 1,051 112 94 78 0.0 15.44 8 1995 1,616 1,367 1,135 119 101 84 0.0 16.63 9 1996 1,698 1,436 1,192 82 69 57 0.0 11.29 10 1997 1,783 1,508 1,232 85 72 60 0.0 11.88 11 1998 1,872 1,584 1,315 89 76 63 0.0 12.47 12 1999 1,967 1,664 1,381 95 80 66 0.0 13.07 13 2000 2,065 1,747 1,450 98 83 69 0.0 13.66

a 10% 462 403 335 324.5 66.32 NPV (1967-1995) : 12% 426 372 309 321.8 61.22 : 15% 379 332 276 317.8 54.59

: 10% 619 536 445 324.5 86.18 NPV (1987-2999) : 12% 555 482 400 321,8 79.18 : 15% 476 414 34 317.8 68.07

: 10% (CF/kW) 804,952 198,000 AIC (1987-1995) : 12% (CF/kW) 864,649 198,000 : 15% (CF/kW) 957,792 198,000

: 10% (CF/kW) 605,068 198,000 AIC (1967-2000): 12% (CF/kW) 668,124 198,000 : 15% (CF/kW) 767,656 198,000

NPV: Net Present Value : 0.10 AIC: Average Increontal Cost I : 0.12 : 0.15 LVS/IIW* 600 CF/S * 330 Annex 3.1 Tables - 112 - Page 34 of 41

Table27: ANJOUANi- SUMMARY OF INCREMENTALGENERATION ANDDISTRIBUTION CAPACITY AND 0 & M COSTS (1987-1995)

17 Discounted I/ Peak Average Annuitized Discounted - Demand Incremental Capacity 0 & M Investments Increments Costs (AIC) Costs Costs

(million CF) (kW) (103 CF/kW) t103 CF/kW (103 CF/kA per year) per year) per year)

Generation - - - 141.38 2/ 65.45

NV distrib. 321.80 372.2 864.65 107.46-/ 43.283/

LV distrib. 61.22 309.2 198.00 24.58 13.86 3/

1/ Discounted at 12%discount rate (Table 3.15). 2/ Annultized costs corresponding to units nr. 1, 2, and 3 In Mutsamudu(Table 3.14). 3/ 0 & M costs (including administration and facilities costs) per year assumedequal to 5% and 7% of the MVand LV average Incremental costs (AIC), respectively. 4/ Assuming for MV and LV networks a l If etime of 30 years and a dIscount rate of 12%. Annuity factc^: 0.124144.

Source: Mission estimates. - 113 - Annex 3.1 iables Page 35 of 41

Table 28: ANJOtUAN- SUMMARY OF 0ENERATIONO&M AND DISTRIBUTIONCOSTS (1987-1995)

(103CFAkW per year)

Voltage MV LV Level Genoration distrlb. distrib, Total

Generation 65.45 - - 65.45

MV level / 78.48 43.28 - 121.76

LV level2/ 94.55 52.15 13.86 160.56

Table 29: ANJOiUAN- SUMMARYOF PEAKCAPACITY COSTS (1987-1995) :103 CF/kW per year)

Voltage MV LV Level Generatlon distrib. distrib. Total

Generation 141.38 - - 141.38

MV level I/ 169.51 107.46 - 276.97

LV level2/ 204.23 129.47 24.58 358.28

1/ MV costa Generationcost / (I - plantpeak lossfactor - MV peak lossfactor). _/ LV cost- MV cost / (I - LV peak lossfactor).

Note: Peak lossfactors taken from Table 3.1 for period1987-1995.

Source: Missionestimates. - 114 - Annex3.1 Tables Page 36 of 41

Table 30: ANJOUAN- ENERGYGENERATION COSTS CALCULATION

Assumptlons:

a) Specific consumption 0.270 kg/kWh b) Diesel oll oconomic cost 90 CF/liltr or 105.86 CF/kg c) Fuel cost per kWh genroated 28.59 CF/kWh d) Lubricants cost (6% fuel cost) 1.72 CF/kWh e) Total generationcosts 31.31 CF/kWh f) Power loss factors (takenfrom Table 3.1)

Voltage Energy Costs Level Peak Off-Peak

-- (CF/kWh)--

Generation 30.31 30.31 NV level 36.34 36.34 LV level 43.79 41.78

Source: Mission estimates. Annex 3.1 Tables - 115 - Page 37 of 41

Table 31: ANJOUAN- SUNNARY OF STRICTLUIC FORCAPACITY AND ENERGY

Voltage Capacity Costs Energy Costs Level Capacity 0 & M Total Peak Off-Peak

(CF/ky/year) ------(CF/kWh) --

Generation 141,380 65,450 206,830 30.31 31.43

WV level 276,970 121,760 398,730 34.68 35.96

LV level 358,280 160,560 518,840 43.79 41.78

Totalequivalent costs per kWh a (Totalcapacity costs per kW per year x SF/LF x 8,760)+ (Energy costs)

SF a factorof simultaneity,assumed 0.5 for M4Vand 1.0 for LV (MV demand at timeof systempeak assumedto be 0.5 of MV own peakdemand)

LF -own load factor (load factor with respectto own Individualpeak demand)assumed to be 0.35 for bothNV and LV,

MV level: 398.730x 0.5 * 34.68 a 65.02 + 34.68 - 99.70CF/kNh (off-peak)0.35 x 8,760

LV level: 518,840x 1.0 + 41.78 a 169.22 + 41.78 a 211.00CF/kWh (off-peak)0.35 x 8,760

Source: Missionestimates. 1987 1988 1989 1990 1991 1992 1993 1994 1995

Clvil works In VoldJouplant 40 ------RehabIlltationof units 1, 2, and 3 90 ------unit 5: a) 1.8 M - 684o/ ------b) 1.2 Mw - 336b/ ------unit 6: a) 1.8Mw ------684o/ - - b) 1.8Mw - - - - - 504b/ -

Replacment of units 1, 2, and 3: a) 2.4 Mw ------456 a/ 456 a/ - b) 2.41M ------237 b/ 238 bl -

Loss Reduction Program - - 2 2 2 - - - - MV distribution 5 5 5 5 5 5 5 5 5 LV distribution 22 24 22 23 24 21 22 21 15

Total: a a) 157 713 29 30 31 26 1,617 482 20 b) 157 365 29 30 31 530 264 264 20

a) I) EEDC specificcosts of diesel units: USS1,150/kWfor all units. S

11) Supply by EEDC of hotel In Mltsamolull. - b) I) Typical specificcosts of diesel units: USS850/kWfor new units and USS6/kGW for replacowentunits. m a II) Private diesel plant In hotel (MV peak reductionof 480 kW). c 0W Source: Mission estimates.

*b 1987 1988 t989 1990 1991 1992 1993 1994 1995

Civilworks for now plant 100 250 -

Unit 1, 2: 2 x 640 kil: a) - 436af ------b) - 360b/ - - _ _ _ _ _

Unit 3: 1 x 640 kW: a) - 218 ------b) _- - _ 180b/- - - -l

29 kV line Mutsamudu-Baubao: - a) 170 a/ 170ata / - - - - - b) 100 100 ------

LV distribution 1 2 18 11 12 13 14 15 17 0 5

Total: a) 271 1,076 18 11 12 13 14 15 17 b) 201 712 18 11 12 13 14 15 17 a) EEi)Cspecific costs (I) diesel units : USSl,034AW (II)20 kV line US$57,240/ka IF,o b) Typicalspecific costs: (I) dieselunits : USS850AkW (II) 20kV line : USS33,670/kmI

0 ' Source: EEDC. _4

*4 - 118 - Annex3.1 Tables Page 40 of 41

Table 34: EEDCELECTRICITY TARIFS (FC/kAWh)

In~~~~~~-

a

1 -- -e

as 2 R

iS~ se ~~e a QC

* a ~~~~~~~ IjL

'4- ( ~

ksE # X o 0F 21" ' 11( LRBMC ExistingTariff Grande Comore AnjeAan Voltage (1986 Deomand Energy 1/ Total Demand Energy 1/ Total / Level CF/kWh) (CF/kA/mo) (CF/kWh) (CF/kWh) (CFAkW/ao) tCFAkWh) (CF/kAh) ..

NV m3 Domestic 120 16,070 37.46 (p) 36.34 (p) Industrial 115 36.17 (op) 33,230 34.68 (op) 100 a LV Domestic 44.07 (p) 43.79 (p) 120 22,100 ( III 43,240 41.76 (op) 212

LV Industrial 44.07 (p) 43.79 (p) 115 22,100 39 I17op) 43,240 41.78 (op) 212 ii

1/ p a Peak; op a Off-peak.

2/ Total cost per kWh = t (Capacity cost per kV per month x SF) (LF x 730) ) + I (0.25) x (Peak energy cost) + (0.75) x (Off-peak energy cost) 1.

SF a Simultaneity factor; assumed to be: 0.85 (MV In Grande Comore), 0.15 (NV In Anjouan), 1.0 (LV). m' LF - Load factor; assumed to be: 0.43 (IV and LV In Grande Comore), 0.35 (MV and LV In Anjousn).

0 Source: Mission estimates. I..r

__~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~U Annex 3.2 - 120 - Page 1 of 9

CRITICAL REVIEWAND ECOOMICANALYSIS OF REHABILITATIONOF SMALLHYDROELECTRIC PLANTS IN ANJOUANAND OF THE TATINA PROJECT

Rehabilitation of the Marahani and Tatinga Superieure HydropowerStations

In a summary report dated 20 November 1985, EEDC compares the followingalternatives:

(a) construction of a new diesel generating station with an installedcapacity of 3 x 700 kW; and

(b) construction of a new diesel generating station with an installed capacity of 2 x 700 kW + 1 x 350 kW in conjunction with the rehabilitationof the Marahani and Tatinga Superieure hydropower stations (approx. 345 kW).

The report recommends adoption of alternative (a). However, the two options are not compared on the basis of sound criteria and assumptions,which is not at all surprising,given EEDC's almost complete lack of planning resources and expertise. Neither the underlying methodologynor the analytical approach employed meets the standards by which such cost comparisorsare usually judged. The analytical approach exhibits three major deficiencies:

(a) The comparison is conducted on the basis of a demand forecast covering the period 1988-1995, i.e., only eight years. Aside from the fact that the estimated annual rates of increase for both peak demand and power generationare of the order of 15%, and thus are significantlyhigher than the demand growth rates observed at any time in the past, it is not permissible to reduce the planning horizon of a hydropower station, which can be used for over 30 years, to the presumed lifetime of a diesel generator.

(b) The economic comparison conducted by EEDC is static, i.e., it does not take into account the varying temporal structures and levels of the expenditures associated with each of the two alternatives.

(c) In both cases, EEDC calculates the required installed capacity on the basis of the estimated future development of peak demand. This serves no useful analytical purpose and complicates the cost comparison without enhancing its accuracy. If the hydropower stations were rehabilitated,they could not be recommissionedbefore the beginning of 1988, and it must be assumed that the daily minimum load at that point would equal or exceed their combined installedcapacity. Thus, - 121 - Annex 3.2 Page 2 of 9

the economic comparison must be undertaken in terms of the following two revised alternatives.

(i) Electricityproduction costs assuming full utilization of that portion of the installed capacity of a large diesel power station which is equivalent to the combined installedcapacity of the two hydropower stations.

(ii) Electricity production costs for a mixed hydro-diesel system in which a stand-by diesel generator is activated if the capacity of the hydro stations is underutilizeddue to seasonal discharge fluctuations. It is assumed that the diesel set would maintain electricity output at a level corresponding to the installed capacity of the hydropower stations.

As far as EEDC's underlying assumptions are concerned, it suffices to say that unrealisticallyhigh cost levels are calculated for both alternatives. For the rehabilitation of the existing hydropower stations,the utility assumes costs of more than US$12,000 per installed kW--a figure that exceeds even the high specific investment costs of a complete micro-hydropowerstation (13 kW) that was recently built from the ground up on Moheli. At US$1,750 per installed kW, the estimated investmentcosts for the diesel generatingstation also exceed the levels reported for plants in the same general capacity range at comparable sites.

To sum up: certain key factors were either ignored completely or inaccuratelyassessed in the cost comparison undertaken by EEDC, and thus the resultingdata can hardly be regarded as an acceptablebasis for investment decisions of this magnitude. In order to obtain a more reliable assessment of the economics of hydroelectric generation and diesel-basedpower supply in Anjouan, the relevant options will now be compared using a sounder analyticalapproach and based on more realistic assumptions.

AnalyticalApprnach

The economics of the two alternatives described above--(i), straight diesel; and (ii), mixed hydro-diesel--willnow be assessed. The two options will be compared in terms of the present value of investment, operation, and maintenance costs over a broad range of alternative discount rates. Note: it is implicitlyassumed that any difference in the cash outflows of the two options can be reinvested at the particular discount rate which has been applied. - 122 - Annex 3.2 Page 3 of 9

Assumptions

(a) The installed capacity of the two rehabilitatedhydro plants (Tatinga Sup4rieure: 120 kW, Marahani: 225 kW) adds up to 345 kW. However, the firm capacity of the two stations will vary in accordance with seasonal changes in the river discharge. The data that are available for Tatinga Supdrieure suggest that firm capacity will drop to 75 kW during the off- peak (-dry) season, which lasts seven months a year. Thus the total energy which can be produced at Tatinga Superieure amounts to:

Peak: 120 kW x 5 x 30 x 24 - 432,000 kWh/A Off-Peak: 75 kW x 7 x 30 x 24 = 378,000 kWh/A Total Tatinga 810,000 kWh/A

Assuming that both sites exhibit the same river discharge characteristics,the figure for Marahani is:

Peak: 225 kW x 5 x 30 x 24 - 810,000 kWh/A Off-Peak 140 kW x 7 x 30 x 24 - 705,600 kWh/A Total Marahani 1,315,600kWh/A

Thus, with a total installed capacity of 345 kW, the two schemes will probably be able to supply a maximum of 2,325,600kWh per year.

In order to produce 2,980,800 kWh per annum--which is equivalent to the total annual energy supplied by a 345 kW diesel station that is run continuously at full load--an additional 130 kW of generating capacity will have to be provided by a stand-by diesel set. Thus, the mixed hydro- diesel system (345 kW hydro + 130 kW diesel) will also produce:

2,325,600kWh/A (hydro) + 655,200 kWh/A (diesel) 2,980,800kWh/A.

(b) With respect to the costs of overhauling the two hydro stations, reliable estimates can be provided for the Tatinga Superieure scheme. Based on cost data for a micro-hydro station recently constructed on Moheli and the results of an on-site investigationconducted by the Mission, rehabilitation costs may be estimatedas follows:

(i) 159-kVA turbine (120 kW) CF 3,500,000 Pc.er channel, etc. CF 5,050,000 Penstock CF 12,000,000 Transformer,etc. CF 6,000,000 Tools, building material CP 24,000,000 - 123 - Annex 3.2 Page 4 of 9

CF 85,000

c.i.f. (551) CF 46,750,000

Total (i) CF 131,750,000

(ii) Locally availablematerial CF 4,192,000 Leasing fees CF 1,500,000 Foreign experts CF 45,600,000 Local manpower CF 12,000,000

Total (ii) CF 63,292,000

Total (i) + (ii) CF 195,042,000

Contingencies(15Z) CF 29,256,000

Grand Total (Tatinga) CP 224,298,000

Thus, the specific costs of rehabilitatingTatinga Sup4rieure may be estimated at CF 1.87 million per kW installed,which is equivalent to US$6,250/kW.

If the above figures are applied to the 225 kW hydropower station at Marahani, which is a condition similar to that of the Tatinga Sup6rieure facility, investment costs work out at about CP 420,750,000. Hence, the investmentcosts involved in the rehabilitationof altogether 345 kW of hydro generating capacity are likely to amount to around CF 645 million (in 1986 prices).

(c) The constructionof a diesel generating station in the 130 kW range would give rise to (accumulated) specific investment costs of CF 375,000/kW (US$1,250/kW). Experience has shown that the replacement costs of a diesel generator of the required size and type are of the order of CF 165,000/kW (US$ 550/kW); on average, the unit would have to be replaced every 8 years. Although the specific investment costs of a larger diesel power station, i.e., the 2,100 kW plant required for the straight diesel option, would probably be slightly lower, the above figures will also be applied to Case (i).

(d) The operating costs of the hydropower stations will be estimated at CF 10.5 million/p.a., which is equivalent of approx. US$100/kW/p.a. The cost levels for a diesel generating station of the required capacity may be estimated as follows: Annex 3.2 - 124 - Page 5 of 9

- Operating costs (wages, etc.): CF 8 million per annum

- Annual maintenance and 5Z of the initial spare parts investmentcosts

- Fuel costs (at economic cost) CF 38/kWh

EEDC currently lists its diesel fuel costs as CF 148/liter. This price is considerablyhigher than the straight c.i.f. costs plus a handling charge; it also includes a high additional charge which is similar to a rent or a tax, and which, consequently,may be ignored in an economic analysis. In the following, fuel costs of CF 90/liter delivered to the power station (in 1986 prices) will be assumed for the entire planning period.

Based on this price and the assumed efficiency (0.36 liter/kW),and taking into account the cost of necessary lubricants, average overall fuel costs work out at approx. CF 38/kWh.

(e) A planning horizon of 32 years is assumed. It is further assumed that the diesel generators will have to be replaced three times during this period. Alternative discount rates ranging between 2.5X and 25% will be applied; the economically relevant range is 10X-15%.

The results of the calculationsare presented in the following table: 2.5 5.0 7.5 10.0 12.5 15.0 17.5 20.0 22.5 25.0

Base StraightDiesel 2,946 2,163 1,672 1,349 1,267 968 850 760 690 633 Case b/ Mixed Hydro-Diesel 1,738 1,448 1,266 1,146 1,064 1,005 961 928 901 880o

Low Invest- ment Case cl StraightDiesel 2,919 2,126 1,645 1,322 1,240 941 823 733 663 606 Pl q

High InvesAaent 5a s Case d/ Mixed Hydro-Diesel 1,890 1,608 1,426 1,306 1,224 1,165 1,121 1,088 1,061 1,040 C

High Fuel StraightDiesel 3,565 2,610 2,012 1,618 1,348 1,155 1,011 902 815 746 Case e/ Mixed Hydro-Diesel 1,874 1,546 1,340 1,205 1,112 1,046 996 959 929 905 bcn80 a/ In millionsof CF at 1986 prices; 345 kW Installed,full load. cn b/ See assumptions(a) - (e). c/ 205 lower initial investmentcosts for straightdiesel option. to O 0c. d/ 25% higher InitialInvestment costs for mixed hydro-dieselsystem (comparedto base case). e/ 25% higher fuel costs (comparedto base case).

Source: EEDC and mission estimatesand calculations.

I kV lb~~~~~~i 0 : P:

0.I tD 1.f~ w0 - 126 - Annex 3.2 Page 7 of 9

The above figures indicate that under the base case assumptions the mixed hydro-dieselsystem will be the most economic option unless the discount rate exceeds 15X. If the initial investment costs of the straight diesel option drop by 20% (Low Investment Case), the miWed option remains more economic up to a discount rate of slightly less than 15%.

The picture changes more dramatically if the rehabilitation costs of the hydropowerstations and/or the fuel costs are varied. A 25% increase in Lhe hydro rehabilitationcosts will render the hydro-diesel system less economic that the straight diesel option unless the discount rate falls below the critical level of 12.5%. On the other hand, even modest increase in fuel costs--a distinct possibility in the near-to- medium-term future--willsharply undermine the economics of the straight diesel option. If, for instance, specific fuel costs amount to CF 47.5/KWh--whichis still less than what EEDC currently lists as its diesel fuel costs--theeconomics of the mixed hydro-dieselsystem improve considerably,and it remains the more economic option up to a discount rate of slightlyunder 20%.

To sum up: the rehabilitation of the existing hydropower stations appears to be an economicallyattractive option that should be given serious consideration in EEDC's future planning.

Tatin&a Project Analysis and Power Demand Forecast for Anjouan

The economic calculationson which the Tatinga planning study is based show an IRR of 12.5% for the project (Tractionel, Tatinga Hydroelelecric Plant, Supplementary Studies, September 1985). As is usually the case with hydropower projects, this profitabilityindicator, as well as the NPV, is very sensitive to changes in demand. Unfortunately, the planning study does not include a sensitivity analysis, and calculationsare based on the assumption that demand will increase by a total of 209% over the first eight years of the plant's life. It is necessary to assume a demand increase of this magnitude in order to ensure that the plant quickly begins operating in the base load range (11 GWh); it is, in turn, imperative that it do so because, economically, the project cannot be demonstrated to be a potentially viable undertakingunless the hydropower station's capacity utilization factor is shown to increasequite rapidly, reaching a high level early on which is then maintained for the duration of the facility's life. It is obvious that there is no empirical basis for the growth rates used !n the study.

In mid-1986, a total of 1,995 consumers were connected to the grid on Anjouan. Of these, 1,918 were private households, and 65 were government offices or facilities;only 12 were industrialcustomers. The supply capacity of the Mutsamudu grid (one of the two grids on Anjouan) is limited at the moment, and thus demand on the island may be described - 127 - Annex 3.2 Page 8 of 9

as suppressed. At present, peak output is 850 kW, with annual power generationtotaling 2.4 GWh.

The following power demand forecast is based on the currently applicabledata on electricityoutput (which is not identicalto demand, owing to high transmission losses). Unlike Tractionel, who predict annual demand growth rates of over 20% following commissioningof the Tatinga hydropower station, and EEDC, who have assumed annual increases of 15X in planning studies for a new diesel generating station, the Mission takes a more conservativeview of electricitydemand growth a;; Anjouan:

Table 2: ANJOUAN:PEAK DEMAND AND ENERGYSALES PROJECTIONS (1986-2010)

Consumption Year or Demand Powergeneration TotalSales kW GWh GWh

1986 a/ 850 2.4 1987a/ 850 2.5 1988a/ 850 2.6

1989 1,060 3.3 2.6 1990 1,145 3,5 2,8 1995 1,682 5.2 4.2 2000 2,146 6.6 5.3 2005 2,738 8.5 6.8 2010 3,495 10.9 8.7

a/ 1986-88In peakoutput, which is the constraint. Source: EEDC and missionestimates and calculations.

The above growth scenario reflects the Mission's view that demand will develop in three distinct phases. The first phase, which extends until the end of 1988, is characterized by limited supply capabilitieswhich will make it impossible for EEDC to meet the existing demand. It is assumed that these constraintswill have been eliminated by the end of 1988 (commissioningof the new diesel generating station), permittingconnection of additionalconsumers to the grid. As a result, the accumulated "backlog" of demand will be met in 1989, and this is reflected in a projected growth rate of 25%. In the years up to and including1995, new consumerswill continue to be connected,resulting in a growth rate of 8% p.a. However, beginning in 1996, a demand growth - 128 - Annex 3.2 Page 8 of 9

rate of only 5% is projected. At present, it must be assumed that system losses account for approx. 30% of the total power generated. While efficiency will rise after the new generating station has been brought on-line and the transmissionand distributionnetwork has been upgraded, certain inherent system loss factors will remain. Consequentl-, the forecast shows a 20% gap between power generation and actual electricity sales.

The above demand projections for Anjouan correspond to real historical growth patterns registered in numerous developing countries. However, in view of the high cost of electricity in the Comoros and the country's low national income, even these relatively conservative estimatesare probably still on the high side.

If the economic feasibility of the Tatinga Project is reassessed on the basis of the revised demand figures presented above, the IRR drops from 12.5% to 5.5%, phowing the project to be uneconomic in terms of the criteria usually applied in such cases. - 129 - Annex 3.3

FOUECASTINCAND PLANNING UMIT AT REDC

It is recommended that a small "forecastingand planning" unit (or group) be created as soon as possible and attached to the DC's office. This unit would comprise two local staff and two expatriates, the local staff being an electrical engineer and an economist. The expatriates could also be part of the management of EEDC, to minimize costs. This unit would have a strategic location within the utility's organization and should have an impact on its planning decisions. Priority should be given to demand studies--which the utility lacks entirely--tariffstudies, and expansion alternativesin order to support more adequately proposals and requests for financing for new installations.

The need for such planning capabilitiesis most urgent because of the near-term connection of some big consumers (hotels) requiring proper evaluation of tariffs, possible power factor correction, the possibilityof some new industrial clients (and the need to study their impact on the distribution system and on tariffs), the possible developmentof hydro generation in Anjouan (and the careful evaluationof costs, reliability, operational needs and personnel), and policies regarding electrificationof new areas. Furthermore,a certain planning and project evaluation capability in EEDC would better enable it to resist pressure brought to bear on the utility to implement specific options which might not coincide with the most economic alternatives. This unit should receive specific technical assistance for a period of three years and would benefit from the computing equipment and incipient data processing facilitiesalready in place. The unit would be separate from the Operation and Financial Departments,although receiving inputs from both. - 130 - Annex 3.4 Page 1 of 5

TECHNICALASPECTS: OBSERVATIONSAND SUGGESTIONS Oh OPERATIONAND MAINTENANCEOF EEDC FACILITIES

The following paragraphs bring together some observationsand suggestions for improving EEDC technical operations and maintenance of its plants and other facilities.

Power Plant Operation

None of the power plants has fuel flow meters. The lack of such meters prevents monitoring the units' heat rate and specific consumption to check unit efficiency and thermal performance. It also prevents the establishmentof any operating merit order. Estimates of fuel consumptionare very rough (only in Fomboni are such measurementsof acceptable accuracy) and unreliable. The method used in Voidjou--multi- plying the generated energy by an "assumed" specific consumption to obtain the total consumption--istotally unacceptable. Statisticaldata for the three main plants indicate average specific diesel consumption rates during 1985 of 0.255 kg/kWh for Voidjou, 0.330 kg/kWh in Mutsamudu and 0.342 kg/kWh in Fomboni. Recent and more reliable estimates for Voidjou indicate a value closer to 0.290 kg/kWh. During commissioning tests of unit No. 4 in 1985, measured consumptionwas 0.226 kg/kWh at 1.5 MW and 0.253 kg/kWh at 0.9 MW. It is recommended that individual fuel meters be installedin all the units plus an additionalmeter in the fuel return path in Voidjou and in the new plant in Mutsamudu. The chief of each plant will be responsiblefor maintainingthe meters in good working order and hourly readings should be recorded. It is estimated that each meter would cost US$2,500-3,000installed.

Informationon generated power and energy is very poor in all the plants and individual wattmeters should be installed after each unit. The only generator provided with a wattmeter and varmeter is unit No. 4 at Voidjou. Similarly, it is recommended that, apart from the auxiliaries, each feeder going out of any power plant be separately metered with measurements of active and reactive power and energy. Mutsamudu has separate active energy metering for the two feeders but Voidjou and Fomboni have only global metering. In Fomboni, the existing phasemeter could be advantageouslyreplaced by a varmeter. On the other hand, the low power factor of the system (0.76 and 0.79 in Voidjou at the time of the mission visits) will certainly justify the installationof shunt power capacitors but an adequate appraisal of the benefits of such installation, their optimum location and rated power also requires previous information on active and reactive power and energy. Measurementand recording of active and reactive power is preferable to current, giving better information on load behavior and characteristics. Assuming that the voltage and current transformersare already in place, the proposed electricalmeasuring equipment for the - 131 - Annex 3.4 Page 2 of 5

plant at Voidjou could amount to US$20,000. The new plant at Mutsamudu should be equipped with similarmetering devices.

Power Plant Maintenance

As a rule, most of the maintenancework is not systematic and the period between generator overhauls is generally longer than recommendedby the manufacturers,either due to capacity constraintsor lack of spares. The need for the 8,000-houroverhaul of units Nos. 1 and 2 in Fomb-ii was anticipated in May 1986, six months in advance of the possible : : date, by the Regional Direction, but by October 1986 the required replacement parts were still not available and the units were due for preventive maintenance. Unit No. 4 in Voidjou, rated 1.8 MW, should already have received preventive maintenance but must remain in service due to the derated capacity of the rest of the plant. The unit suffered a breakdown a few months after commissioning(January 1985) and has been running practicallywithout interruption.1/ Under the present conditions,any outage of this unit will imply significantload-sheddings for periods up to 6 hours. A broken crankshaft in unit No. 3 in Voidjou (December 1982) caused load sheddings during peak periods for several weeks and the repair costs amounted to CF 100 million (US$263,000 of 1983), which is more than 50X of its initial cost. Difficulties in obtaining spare parts seem related to cash or credit problems with suppliers 2/ and eventually lead to longer outage times and higher operatingcosts.

Sub-Transmissionand Distribution

Two standard voltages are presently used in primary distribution (of sub-transmission): 20 kV and 5.5 kV. Low voltage distributionis made at 220/380 kV and the frequency is 50 Hz. All MV and LV systems are aerial. The 20 kV system is mainly developed in Grande Comore with two long feeders originatingin the plant of Voidjou, one to the north aid the other to the south, featuring 123 km of overhead lines. A small and old section of 15 5.5 kV line will be upgraded to 20kV in 1987, as soon as a third feeder, under construction, is completed. Moheli also has a short network of 8 km at 20 kV. In Anjouan, primary distributionis at 5.5 kV and a 20 kV line of 18 km crossing the island between Ouani and Bambao, the main short-term investment in distribution is to be built in connection with the new

1/ At the time of the mission's visit, the unit had been running for 12,000 hours, on a nearly continuous basis, without inspection or preventivemaintenance.

2/ The price c.i.f. Moroni of any equipment or spare part is normally 60% higher than the price f.o.b. in Europe. - 132 - Annex 3.4 Page 3 of 5

Mutsamudu diesel plant. The total length of networks and the number of MV/LV transformersis shown in Table 1.5. Given the distances in the islands and the extension of the existing systems, 20 kV is an adequate MV level for several years. In the long term, if generation is concentratedin a single main power plant for the whole island, a review of the MV distributionlevels may be advisablefor Grande Comore.

The operating condition of the networks seems acceptablewith the exception of the older sections in the most densely populated areas of Moroni (in Grande Comore) and Mutsamudu (in Anjouan). The lack of materials has led to a mixing of conductor sections increasinglosses and voltage drops. All the conductors, both in MV and LV, are in copper which is not the most economic solution. EEDC i2 aware of the situation and the new 20 kV feeders are made with 54.6 mm Almelec conductors. 3/ Some of the poles are painted steel "lattice" structureswhich show clear signs of corrosiondue to inadequatemaintenance. This type of structure was abandoned several years ago and broken poles have been replaced by galvanizedsteel poles.

Since 1982, a great effort has been devoted to the installation of watt-hour meters for all consumers. Metering at the consumer level seems to be rather complete and well-maintained(for lack of meters, a high number of potential consumers are kept by EEDC on a waiting list), billing and collection procedures are acceptable, and non-technical losses (i.e., non-paymentand theft) appear to be low. EEDC claims that the present amount of theft is negligible and not higher than 1% of generation. While there are no records to confirm the assumption, the figure seems highly optimisticat least for Anjouan.

In order to monitor system operation and customer load characteristicsfor load forecastingand loss reduction,adequate mapping and metering is a necessity. Detailed schemes for the MV and LV networks are not available, with the exception of Moheli. The lack of such diagrams hinders the control of network development,namely at the LV level, and the knowledge of the range covered by each distribution transformer. Taking into account that topographicalcharts do not exist for Moroni and Mutsamudu,and as the mapping of a network is a very time consuming task requiringpermanent updating if the resultingdata are to be useful, the establishmentof single-linediagrams for the LV networks is not immediately justifiable. On the other hand, it is recommended that detailed diagrams be established for the MV networks connected to Voidjou and Mutsamudu. Such diagrams should indicate the characteristics and lengths of conductors in the different line sections, the location and characteristicsof MV/LV transformers,and the number and approximate peak demand of cGa.umersconnected on the LV side of each transformer.

3/ In terms of electrical resistance and therefore of losses, an Almelec conductor with a cross-sectionof 54.6 mm2 is equivalent to a copper conductorof 29.2 mmn. - 133 - Annex 3.4 Page 4 of 5

Except for consumers, metering in the EEDC system is practically non-existent. Individual feeder current readings are obtained by using a portable meter. Readings are made at irregulartimes of the day and month and do not accurately represent maximum monthly load. Voltage readings are taken with a portable voltmeter. The result is that no meaningful information is obtained. The fact that most transformersare pole mounted also hinders the installationof metering devices. It is recommended that, preceding a loss reduction study, a detailed analysis of the MV networks in Grande Comore and Anjouan be carried out in order to define the appropriate location and costs for installationof watthour meters with a maximum demand attachment. These meters would be used as a means of determining the split in MV and LV distribution losses and, if correlated with customer's watthour meter readings, distribution system losses and possible energy theft. Tentative measurementsof peak demand for the LV load connected to each transformer should be made to optimize the size and location of new transformersand the allocation of load to the existing ones. These measurementswould also give the necessary input data for a power factor correction study to define the number, location, and size of shunt capacitorbanks.

Preparationof MaintenanceStrategy

The preparationof this maintenance strategy could be the task of consulting services whose Terms of Reference should cover the followingactivities:

(a) Design and implementa comprehensiveand documented preventive maintenance plan for diesel sets and specific plant operating instructions. Such a plan would include maintenance cars, maintenancereports, maintenance time schedules for each unit, engine history books, and operatinginstructions.

(b) Prepare standardizedoperating procedures for the diesel units to be displayedin the power house.

(c) Prepare a survey of currentwarehousing facilities in the three main power plants (Voidjou, Mutsamudu, and Fomboni) and inventory mechanisms. Prepare an inventory of the different parts required for various types of maintenance,recommend an institutionalmechanism for the timely supply of spare parts, and a system for their selection, storage, and inventory control.

(d) Review staff skill levels and prepare and implementa training course for supervisors, operators, and maintenance staff covering basic electricity,combustion engine design, operation and maintenance,and load management. - 134 - Annex 3.4 Page 5 of 5

Some recommendations,like the engine history book and maintenancecard schedules,could be implementedimmediately. It is recommendedthat the same form foi books and cards be used in all the plants throughoutthe three islands. Samplemodels shouldbe designed and operatorsand maintenancestaff shouldbe shownhow to fill them out properly. The powerplant chief shouldbe ultimatelyresponsible for the adequate and timely updating and recordingof the informationo A specifictechnical assistance program should be designedto preparethe maintenanceand trainingactivities. -135 - - 135 - ~~~~AnnexPage 1 3.5of 13

CLANDECOMORE - Case 1 Demnd and Loss Forecast at Time of System Peak

LV MNV Peak Cons. Doed LV MV Syst Annu Peak L' Noro Big Peak MV Peak Plan Gen* Load Year Grow Dead Loss Grow Cons Deed Loss Deud Loss Peak Fact Gener

S KW S KW KW KW KiW S KW Wh

1985 1,483 15 300 0 2,045 8 2,223 9 2,442 0.44 9,414 966 7 1,587 15 321 0 2,188 8 2,378 9 2,613 0.43 9,844 1987 7 1,698 15 332 0 2,330 8 2,532 8 2,753 0.48 10,127 1988 7 1,817 15 344 300 2,781 9 3,056 8 3,322 0.42 12,222 1989 6 1,926 15 354 450 3,070 9 3,373 7 3,627 0.42 13,345 1990 6 2,041 15 365 580 3,346 9 3,677 7 3,954 0.43 14,894 1991 6 2,164 15 376 580 3,501 9 3,848 7 4,137 0.43 15,584 1992 5 2,272 15 385 580 3,638 9 3,998 7 4,299 0.43 16,193 1993 5 2,386 15 395 580 3,781 9 4,155 7 4,468 0.43 16,830 1994 5 2,505 15 405 580 3,931 9 4,320 7 4,646 0.43 17,499 1995 3 2,580 15 411 580 4,026 99 4,424 7 4,757 0.44 18,336 1996 3 2,657 15 417 560 4,123 9 4,531 7 4,872 0.44 18,779 1997 3 2,737 15 423 580 4,223 9 4,641 7 4,990 0.44 19,234 1998 3 2,819 15 429 580 4,326 9 4,754 7 5,112 0.44 19,703 1999 3 2,904 15 436 580 4,432 9 4,870 7 5,237 0.44 20,186 2000 3 2,991 15 442 580 4,541 9 4,990 7 5,366 0.44 20.682

Annu a Annual Cons - Consumer Dead * Demand Genera Generation Grow a Growth LV a Low Voltage MV a MediumVoltage Norm a Normal Syst - System

Coments: a) Base Case. - 136 - Annex 3.5 Page 2 of 13

GRANDE COMORE - Case 2 Demand and Loss Forecast at Time of System Peak

LV MV Peak Cons. Doed LV ------MV Syst Annu Peak LV Norm Big Peak MV Peak Plan Gene Load Year Grow Deed Loss Grow Cons Ded Loss Deed Loss Peak Fact Gener

S KW S KW KW KW S KW S VW MWh

1985 1,483 15 300 0 2,045 8 2,223 9 2,442 0.44 9,414 1986 7 1,587 15 321 0 2,188 8 2,378 9 2,613 0.43 9,844 1987 7 1,698 15 332 0 2,330 8 2,532 8 2,753 0.42 10,127 1988 7 1,817 15 344 300 2,781 9 3,056 8 3,322 0.42 12,222 1989 7 1,944 15 356 450 3,093 9 3,399 7 3,655 0.42 13,446 1990 7 2,080 15 368 580 3,395 9 3,731 7 4,012 0.43 15,113 1991 7 2,226 15 381 580 3,580 9 3,934 7 4,230 0.43 15,932 1992 7 2,381 15 395 580 3,776 9 4,150 7 4,462 0.43 16,808 1993 7 2,548 15 408 580 3,986 9 4,380 7 4,710 0.43 17,742 1994 7 2,726 15 423 580 4,210 9 4,627 7 4,975 0.43 18,739 1995 7 2,917 15 437 580 4,450 9 4,890 7 5,258 0.44 20,265 1996 5 3,063 15 448 580 4,632 9 5,090 7 5,473 0.44 21,097 1997 5 3,216 15 460 580 4,824 9 5,301 7 5,700 0.44 21,968 1998 5 3,377 15 471 580 5,024 9 5,521 7 5,937 0.44 22,882 1999 5 3,546 IS 483 580 5,235 9 5,752 7 6,185 0.44 23,a 4 l 2000 5 3,723 15 495 580 5,455 9 5,995 7 6,446 0.44 24,846

Annu u Annual Cons 2 Consumer Demd a Demand Gener = Generation Grow 2 Growth LV a Low Voltage MV = Medium Voltage Norm = Normal Syst a System

Comments: a) High Scenario. (I) Higher growth rate of LV peak demand; (ii) ConstantLV and MV loss factors. Annex 3.5 - 137 Page 3 of 13

GRANDE COMORE - Case 3 Demand and Loss Forecast at Time of Svstem Peak

LV MV Peak Cons. Deed LV ----- MV Syst Annu Peak LV Norm Big Peak MV Peak Plan Gene Load Year Grow Demd Loss Grow Cons Demd Loss Demd Loss Peak Fact Goner

S KW S KW KW KW S KW S KW MWh

1985 1,483 15 300 0 2,045 8 2,223 9 2,442 0.44 9,414 1986 5 1,557 15 315 0 2,147 8 2,334 9 2,564 0.43 9,660 1987 5 1,635 15 323 0 2,246 8 2,442 8 2,654 0.42 9,765 1988 5 1,717 15 331 240 2,591 9 2,847 8 3,094 0.42 11,385 1989 4 1,785 15 338 360 2,798 9 3,075 7 3,306 0.42 12,164 990 4 1,857 15 344 480 3,009 9 3,306 7 3,555 0.43 13,392 991 4 1,931 14 351 480 3,077 8 3,344 7 3,596 0.43 13,545 1992 3 1,989 14 356 480 3,149 8 3,423 7 3,681 0.43 13,865 1993 3 2,049 13 362 480 3,197 8 3,475 7 3,736 0.43 14,073 1994 3 2,110 13 367 480 3,273 7 3,519 7 3,784 0.43 14,253 1995 2 2,152 12 371 480 3,297 7 3,545 7 3,812 0.44 14,692 1996 2 2,195 12 375 480 3,349 7 3,602 7 3,873 0.44 14,927 1997 2 2,239 12 378 480 3,403 7 3,659 7 3,935 0.44 15,166 1798 2 2,284 12 382 480 3,458 7 3,718 7 3,998 0.44 15,409 1999 2 2,330 12 386 480 3,513 7 3,778 7 4,062 0.44 15,658 2000 2 2,376 12 390 480 3,570 7 3,839 7 4,128 0.44 15,911

Annu Annual Cons a Consumer Demda Demand Gener a Generation Grow - Growth LV Low Voltage NV = MediumVoltage Norm = Normal Syst = System

Comments: a) Low Scenario (1)Lower growth rate of LV peak demandand MVbig consumerspeak; (11)Decreasind MV and LV loss factors. - 138 - Annex 3.5 Page 4 of 13

CRANDE COMORE - Case 4 Demand and Loss Forecast at Time of System Peak

LV MNV Peak Cons. Dead LV -M Syst Annu Peak LV Norm Big Peak MV Peak Plan Gene Load Year Grow Dead Loss Grow Cons Dead Loss Dead Loss Peak Fact Gener

_ KW S KW KW KW S KW S KW MWh

196S 1,483 15 300 0 2,045 8 2,223 9 2,442 0.44 9,414 1966 7 1,587 15 321 0 2,188 8 2,378 9 2,613 0.43 9,844 1967 7 1,696 15 332 0 2,330 8 2,532 8 2,753 0.42 10,127 1988 7 1,817 15 344 300 2,781 9 3,056 8 3,322 0.42 12,222 1969 6 1,926 15 354 450 3,070 9 3,373 7 3,627 0.42 13,345 1990 6 2,041 16 365 580 3,375 10 3,750 7 4,032 0.43 15,188 1991 6 2,164 16 376 560 3,532 10 3,924 7 4,219 0.43 15,894 1992 5 2,272 16 385 580 3,670 11 4,123 7 4,434 0.43 16,701 1993 5 2,386 16 395 580 3,815 11 4,286 7 4,609 0.43 17,360 1994 5 2,505 16 405 580 3,967 12 4,507 7 4,847 0.43 18,257 1995 3 2,580 18 411 580 4,137 12 4,701 7 5,055 0.44 19,484 1996 3 2,657 18 417 580 4,238 12 4,815 7 5,178 0.44 19,958 1997 3 2,737 16 423 580 4,341 12 4,933 7 5,304 0.44 20,445 1998 3 2,819 16 429 580 4,446 12 5,054 7 5,434 0.44 20,946 1999 3 2,904 16 436 560 4,5S7 12 5,179 7 5,566 0.44 21,463 2000 3 2,991 16 442 580 4,670 12 5,307 7 5,706 0.44 21,994

Annu a Annual Cons a Consumer Dead = Demand Gener a Generation Grow - Growth LV = Low Voltage MV - Medium Voltage Norm - Normal Syst a System

Coents: a) Higher Loss Scenario (i) Increasing MV and LV loss factors. Annex 3.5 - 139 - Page 5 of 13

GRANDSCONORE - Case 5 Demand and Loss Forecast at Time of System Peak

LV MV Peak Cons. Oead LV MV Syst Annu Peak LV Norm Big Peak MV Peak Plan Gene Load Year Grow Deed Loss Grow Cons Dead Loss Dead Loss Peak Fact Gener

S KW % KW KW KW S KW S KW MWh

1985 1,483 15 300 0 2,045 8 2,223 9 2,442 0.44 9,414 1986 7 1,587 15 321 0 2,168 8 2,378 9 2,613 0.43 9,844 19B7 7 1,698 15 332 0 2,330 8 2,532 8 2,753 0.42 10,127 1968 7 1,817 15 344 300 2,781 9 3,056 8 3,322 0.42 12,222 1969 6 1,926 15 354 450 3,070 9 3,373 7 3,627 0.42 13,345 1990 6 2,041 15 365 580 3,346 9 3,677 7 3,954 0.43 14,894 9I91 6 2,164 14 376 580 3,472 8 3,774 7 4,058 0.43 15,284 1992 5 2,272 14 385 580 3,607 8 3,921 7 4,216 0.43 15,880 1993 5 2,386 13 395 580 3,717 8 4,040 7 4,344 0.43 16,363 1994 5 2,505 13 405 580 3,864 7 4,155 7 4,467 0.43 16,827 1995 3 2,580 12 411 580 3,922 7 4,218 7 4,535 0.44 17,480 1996 3 2,657 12 417 580 4,017 7 4,319 7 4,644 0.44 17,900 1997 3 2,737 12 423 580 4,113 7 4,423 7 4,756 0.44 18,331 1996 3 2,819 12 429 580 4,213 7 4,530 7 4,871 0.44 18,776 1999 3 2,904 12 436 580 4,316 7 4,641 7 4,990 0.44 19,233 2000 3 2,991 12 442 580 4,421 7 4,754 7 5,112 0.44 19,703

Annu a Annual Cons - Consumer Deand= Demand ¢ener a Generation Grow - Growth LV a Low Voltage MV - MediumVoltage Norm - Normal Syst * System

C4meents: a) Base Case with ReducedLosses. (i) Decreasing LV and NV loss factors. - 140 - Annex 3.5 Page 6 of 13

GRANDECOMORE - Case 6 Demand and Loss Forecast at Time of System Peak

LV MV Peak Cons. Demd LV ------MV Syst Aanu Peak LV Norm Big Peak MV Peak Plan Gene Load Year Grow Demd Loss Grow Cons Demd Loss Demd Loss Peak Fact Gener

% KW S KW KW KW % KW % KW MWh

1985 1,483 15 300 0 2,045 8 2,223 9 2,442 0.44 9,414 1986 7 1,587 15 321 0 2,188 8 2,378 9 2,613 0.43 9,844 1987 7 1,698 15 332 0 2,330 8 2,532 8 2,753 0.42 10,127 1988 7 1,817 15 344 300 2,781 9 3,056 8 3,322 0.42 12,222 1989 7 1,944 15 356 450 3,093 9 3,399 7 3,655 0.42 13,446 1990 7 2,080 15 368 580 3,395 9 3,731 7 4,012 0.43 15,113 1991 7 2,226 14 381 580 3,549 8 3,858 7 4,148 0.43 15,625 1992 7 2,381 14 395 580 3,744 8 4,069 7 4,375 0.43 16,481 1993 7 2,548 13 408 580 3,917 8 4,258 7 4,578 0.43 17,246 1994 7 2,726 13 423 580 4,137 7 4,448 7 4,783 0.43 18,015 1995 7 2,917 12 437 580 4,333 7 4,659 7 5,009 0.44 19,308 1996 5 3,063 12 448 580 4,509 7 4,849 7 5,214 0.44 20,095 1997 5 3,216 12 460 580 4,695 7 5,048 7 5,428 0.14 20,921 1998 5 3,377 12 471 580 4,889 7 5,257 7 5,652 0.44 21,787 1999 5 3,546 12 483 580 5,092 7 5,476 7 5,888 0.44 22,694 2000 5 3,723 12 495 580 5,306 7 5,705 7 6,135 n 44 23,646

Annu = Annual Cons = Consumer Demd= Demand Gener = Generation Grow = Growth LV = LowVoltage MV = MediumVoltage Norm= Normal Syst = System

Comments: a) High Scenariowith Reduced Losses. (i) Higher growth rate of LV and MV peak demand. (li) Decreasing LV and MV loss factors. - 141 - Annex 3.5 Page 7 of 13

GRANDECOMORE - Case 7 Demnd and Loss Forecast at Time of System Peak

LV MV Peak Cons. Deed LV ------MV Syst Annu Peak LV Norm Big Peak MV Peak Plan Gene Load Year Grow Deed Loss Grow Cons Deed Loss Deed Loss Peak Fact Gener

% KW S KW KW KW % KW % KW MWh

1985 1,483 15 300 0 2,045 8 2,223 9 2,442 0.44 9,414 1986 5 1,557 15 315 0 2,147 8 2,334 9 2,564 0.43 9,660 1987 5 1,635 15 323 0 2,246 8 2,442 8 2,654 0.42 9,765 1988 5 1,717 15 331 240 2,591 9 2,847 8 3,094 0.42 11,385 1989 4 1,785 15 338 360 2,798 9 3,075 7 3,306 0.42 12,164 1990 4 1,857 16 344 480 3,035 10 3,372 7 3,626 0.43 13,658 1991 4 1,931 16 351 480 3,130 10 3,478 7 3,740 0.43 14,087 1992 3 1,989 16 356 480 3,204 11 3,600 7 3,871 0.43 14,583 1993 3 2,049 16 362 480 3,281 11 3,686 7 3,964 0.43 14,931 1994 3 2,110 16 367 480 3,359 12 3,817 7 4,105 0.43 15,462 1995 2 2,152 18 371 480 3,476 12 3,950 7 4,247 0.44 16,370 1996 2 2,195 18 375 480 3,532 12 4,014 7 4,316 0.44 16,635 1997 2 2,239 18 378 480 3,589 12 4,079 7 4,386 0.44 16,904 1998 2 2,284 18 382 480 3,648 12 4,145 7 4,457 0.44 17,179 1999 2 2,330 18 386 480 3,707 12 4,213 7 4,530 0.44 17,460 2000 2 2,376 18 390 480 3,768 12 4,282 7 4,604 0.44 17,746

Annu = Annual Cons = Consumer Demd = Demand Genera Generation Grow= Growth LV = Low Voltage 4V = Medium Voltage Norm = Normal Syst = System

Comments: a) Low Scenario with Increasing Losses. (i) Lower growth rate of LV peak demand and MV big consumers peak; (11) IncreasingMV and LV loss factors. - 142 - Annex 3.5 Page 8 of 13

ANJOUAN - Case 1 Demand and Loss Forecast at Time of System Peak

LV Peak MV Demd LV Peak Syst Annu Peak LV Oemd MV Peak Plant Gener Load Year Grow Demd Loss MV Loss Demd Loss Peak Fact Gener

S KW S KW S KW % KW Wh

1985 598 17 720 10 800 8 870 0.30 2,286 1986 2 610 17 735 10 817 8 888 0.30 2,334 1987 1 616 17 742 10 824 8 896 0.30 2,355 1988 1 622 17 749 10 832 8 904 0.30 2,376 1989 15 715 17 861 10 957 7 1,029 0.35 3,155 1990 8 772 17 930 10 1,033 6 1,099 0.35 3,370 1991 8 834 17 1,005 10 1,117 6 1,188 0.35 3,642 1992 8 901 17 1,086 10 1,207 6 1,284 0.35 3,937 1993 8 973 17 1,172 10 1,302 6 1,385 0.35 4,246 1994 8 1,051 17 1,266 10 1,407 6 1,497 0.35 4,590 1995 8 1,135 17 1,367 10 1,519 6 1,616 0.37 5,238 1996 5 1,192 17 1,436 10 1,596 6 1,698 0.37 5,504 1997 5 1,252 17 1,508 10 1,676 6 1,783 0.37 5,779 1998 5 1,315 17 1,584 10 1,760 6 1,872 0.37 6,068 1999 5 1,381 17 1,664 10 1,849 6 1,967 0.37 6,375 2000 5 1,450 17 1,747 10 1,941 6 2,065 0.40 7,236

Annu = Annual Cons = Consumer Demd = Demand Gener = Generation Grow = Growth LV = Low Voltage MV = Medium Voltage Norm = Normal Syst = System

Co_ents: a) Base Case. - 143 - Annex 3.5 Page 9 of 13

ANJOUAN- Case 2 Demand and Loss Forecast at Time of System Peak

LV Peak MV Deed LV Peak Syst Annu Peak LV Demd MV Peak Plant Gener Load Year Grow Domd Loss MV Loss Demd Loss Peak Fact Gener

KW % KW % KW S KW MKh

1985 598 17 720 10 800 8 870 0.30 2,286 1986 2 610 17 735 10 817 8 888 0.30 2,334 1987 1 616 17 742 10 824 8 896 0.30 2,355 1988 1 622 17 749 10 832 8 904 0.30 2,376 1989 15 715 17 861 10 957 7 1,029 0.35 3,155 1990 12 801 17 965 10 1,072 6 1,140 0.35 3,495 1991 10 881 17 1,061 10 1,179 6 1,254 0.35 3,845 1992 10 969 17 1,167 10 1,297 6 1,380 0.35 4,231 1993 9 1,056 17 1,272 10 1,413 6 1,503 0.35 4,608 1994 9 1,151 17 1,387 10 1,541 6 1,639 0.35 5,025 1995 8 1,243 17 1,498 10 1,664 6 1,770 0.37 5,737 1996 8 1,342 17 1,617 10 1,797 6 1,912 0.37 6,197 1997 7 1,436 17 1,730 10 1,922 6 2,045 0.37 6,628 1998 7 1,537 17 1,852 10 2,058 6 2,189 0.37 7,095 1999 7 1,645 17 1,982 10 2,202 6 2,343 0.37 7,594 2000 7 1,760 17 2,120 10 2,356 6 2,506 0.40 8,781

Annu = Annual Crons = Consumer Demd = Demand Gener = Generation Grow = Growth LV = Low Voltage MV - Medium Voltage Norm = Normal Syst = System

Comments: a) High Scenario. (i) Higher growth rate of LV peak demand. Annex 3.5 - 144 - Page 10 of 13

ANJOUAN- Case 3 Demand and Loss Forecast at Time of System Peak

LV Peak MV Deed LV Peak Syst Annu Peek LV Dead MV Peak Plant Goner Load Year Grow Demd Loss MV Loss Demd Loss Peak Fact Gener

S KW S KW S KW S KW MKh

1985 598 17 720 10 800 8 870 0.30 2,286 1986 2 610 17 735 10 817 8 888 0.30 2,334 1987 1 616 17 742 10 824 8 896 0.30 2,355 1988 1 622 17 749 10 832 8 904 0.30 2,376 1989 10 684 17 824 10 916 7 985 0.35 3,020 1990 8 739 17 890 10 989 6 1,052 0.35 3,225 1991 8 798 17 961 10 1,068 6 1,136 0.35 3,483 1992 7 854 17 1,029 10 1,143 6 1,216 0.35 3,728 1993 7 914 17 1,101 10 1,223 6 1,301 0.35 3,989 1994 6 969 17 1,167 10 1,297 6 1,380 0.35 4,231 1995 6 1,027 17 1,237 10 1,374 6 1,462 0.37 4,739 1996 5 1,078 17 1,299 10 1,443 6 1,535 0.37 4,975 1997 5 1,132 17 1,364 10 1,516 6 1,613 0.37 5,228 1998 5 1,189 17 1,433 10 1,592 6 1,694 0.37 5,491 1999 4 1,237 17 1,490 10 1,656 6 1,762 0.37 5,711 2000 4 1,286 17 1,549 10 1,721 6 1,831 0.40 6,416

Annu = Annual Cons = Consumer Demd = Demand Gener = Generation Grow = Growth LV = Low Voltage MV = Medium Voltage Norm = Normal Syst a System

Comments: a) Low Scenario. (I) Lower growth rate of LV peak demand. - 145 - Annex 3.5 Page 11 of 13

ANJOUAN- Case 4 Demand and Loss Forecast at Time of System Peak

LV Peak MV Demd LV Peak Syst Annu Peak LV Demd MV Peak Plant Gener Load Year Grow Doud Loss MV Loss Dend Loss Peak Fact Goner

KW S KW S KW S KW MKh

1985 598 17 720 10 600 8 870 0.30 2,286 1986 2 610 17 735 10 817 8 888 0.30 2,334 1987 1 616 17 742 10 824 8 896 0,30 2,355 1988 1 622 17 749 10 832 8 904 0.30 2,376 1989 15 715 17 861 10 957 7 1,029 0.35 3,155 1990 8 772 15 908 10 1,009 6 1,073 0.35 3,290 1991 8 834 15 981 10 1,090 6 1,160 0.35 3,557 1992 8 901 15 1,060 10 1,178 6 1,253 0.35 3,842 1993 8 973 13 1,118 9 1,229 6 1,307 0.35 4,007 1994 8 1,051 13 1,208 9 1,327 6 1,412 0.35 4,329 1995 8 1,135 13 1,305 9 1,434 6 1,526 0.37 4,946 1996 5 1,192 13 1,370 9 1,505 6 1,601 0.37 5,189 1997 5 1,252 13 1,439 9 1,581 6 1,682 0.37 5,452 1998 5 1,315 13 1,511 9 1,660 6 1,766 0.37 5,724 1999 5 1,381 13 1,587 9 1,744 6 1,855 0.37 6,012 2000 5 1,450 13 1,667 9 1,832 6 1,949 0.40 6,829

Annu = Annual Cons = Consumer Demda Demand Goner - Generation Grow a Growth LV Low Voltage MV u MediumVoltage Norm = Normal Syst a System

Comments: a) Base Case with Loss Reduction. (1)Reduction of MVand LV loss factors. - 146 - Annex 3.5 Page 12 of 13

ANJOUAN - Case 5 Demand and Loss Forecast at Time of System Peak

LV Peak MV Demd LV Peak Syst Annu Peak LV Demd MV Peak Plant Gener Load Year Grow Demd Loss MV Loss Demd Loss Peak Fact Gener

% KW % KW S KW S KW MKh

1985 598 17 720 10 800 8 870 0.30 2,286 1986 2 610 17 735 10 817 8 888 0.30 2,234 1987 1 616 17 742 10 824 8 896 0.30 2,355 1988 1 622 17 749 10 832 8 904 0.30 2,376 1989 25 778 17 937 10 1,041 7 1,119 0.35 3,431 1990 8 840 17 1,012 10 1,124 6 1,196 0.35 3,667 1991 8 907 17 1,093 10 1,214 6 1,291 0.35 3,958 1992 8 980 17 1,181 10 1,312 6 1,396 0.35 4,280 1993 8 1,058 17 1,275 10 1,417 6 1,507 0.35 4,620 1994 8 1,143 17 1,377 10 1,530 6 1,628 0.35 4,991 1995 8 1,234 17 1,487 10 1,652 6 1,757 0.37 5,695 1996 5 1,296 17 1,561 10 1,734 6 1,845 0.37 5,980 1997 5 1,361 17 1,640 10 1,822 6 1,938 0.37 6,281 1998 5 1,429 17 1,722 10 1,913 6 2,035 0.37 6,596 1999 5 1,500 17 1,807 10 2,008 6 2,136 0.37 6,923 2000 5 1,575 17 1,898 10 2,109 6 2,244 0.40 7,863

Annu = Annual Cons = Consumer Deamd= Demand Gener = Generation Grow = Growth LV = Low Voltage MV = Medium Voltage Norm = Normal Syst = System

Comments: a) Base Case with Higher 1989 Demand Growth. (I) Demand growth of 25% in 1989. - 147 - Annex 3.5 Page 13 of 13

ANJOUAN- Case 6 Demand and Loss Forecast at Time of System Peak

LV Peak MV Demd LV Peak Syst Annu Peak LV Demd MV Peak Plant Goner Load Year Grow Doed Loss MV Loss Demd Loss Peak Fact Goner

S KW S KW % KW S KW Wh

1985 598 17 720 10 800 8 870 0.30 2,286 1986 10 658 17 793 10 881 8 958 0.30 2,518 1987 9 717 17 864 10 960 8 1,043 0.30 2,741 1988 8 774 17 933 10 1,037 8 1,127 0.30 2,962 1989 15 890 17 1,072 10 1,191 7 1,281 0.35 3,928 1990 8 961 17 1,158 10 1,287 6 1,369 0.35 4,197 1991 8 1,038 17 1,251 10 1,390 6 1,479 0.35 4,535 1992 8 1,121 17 1,351 10 1,501 6 1,597 0.35 4,896 1993 8 1,211 17 1,459 10 1,621 6 1,724 0.35 5,286 1994 8 1,308 17 1,576 10 1,751 6 1,863 0.35 5,712 1995 8 1,413 17 1,702 10 1,891 6 2,012 0.37 6,521 1996 5 1,484 17 1,788 10 1,987 6 2,114 0.37 6,852 1997 5 1,558 17 1,877 10 2,086 6 2,219 0.37 7,192 1998 5 1,636 17 1,971 10 2,190 6 2,330 0.37 7,552 1999 5 1,716 17 2,070 10 2,300 6 2,447 0.37 7,931 2000 5 1,804 17 2,173 10 2,414 6 2,568 0.40 8,998

Annu = Annual Cons = Consumer Deed a Demand Gener = Generation Grow = Growth LV = Low Voltage MV = Medium Voltage Norm = Normal Syst a System

Comments: a) Base Case without Repressed Demand. (i) No repressed demand from 1986 to 1989. 413 40 45° COMOROS COMORES

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Togo June 1985 5221-TO Vanuatu June 1985 5577-VA Tonga June 1985 5498-TON Western Samoa June 1985 5497-WSO Burma June 1985 5416-BA Thailand September 1985 5793-TH Sao Tome and Principe October 1985 5803-STP Ecuador December 1985 5865-EC Somalia December 1985 5796-SO Burkina January 1986 5730-BUR Zaire May 1986 5837-ZR Syria May 1986 5822-SYR Ghana November 1986 6234-GH Guinea November 1986 6137-GUI Madagascar January 1987 5700-MAG Mozambique January 1987 6128-MOZ Swaziland February 1987 6262-SW Honduras August 1987 6476-HO Sierra Leone October 1987 6597-SL

Energy Assessment Status Reports

Papua New Guinea July, 1983 Mauritius October, 1983 Sri Lanka January, 1984 Malawi January, 1984 Burun i February, 1984 Bangladesh April, 1984 Kenya May, 1984 Rwanda May, 1984 Zimbabwe August, 1984 Uganda August, 1984 Indonesia September, 1984 Senegal October, 1984 Sudan November, 1984 Nepal January, 1985 Zambia August, 1985 Peru August, 1985 Haiti August, 1985 Paraguay September, 1985 Morocco January, 1986 Niger February, 1986