Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized ReportNo. 4303-EAF STAFF APPRAISAL REPORT Public Disclosure Authorized BURUNDI - RWANDA - ZAIRE RUZIZI II REGIONAL HYDROELECTRIC POWER PROJECT Public Disclosure Authorized May 5, 1983 Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Currency Equivalents Burundi Franc (FBu) Rwanda Franc (FRw) Zaire (Z) FBu 1 - US$0.01 FRw 1 - US$0.01 Zi - US$0.17 US$1 - FBu 87 US$1 - FRw 87 US$1 - Z5.9 Measurements GWh gigawatt hour - 1,000,000 kilowatt hours kcal kilocalorie - 3.97 British thermal units kV kilovolt - 1,000 volts kVA kilovolt ampere - 1,000 volt amperes kW kilowatt - 1,999 watts kWh kilowatt hours - 1,000 watt hours MWh megawatt hour - 1,000 kilowatt hours MW megawatt - 1,000 kilowatts toe ton of oil equivalent - 10,500,000 kilocalories ton metric ton - 1.1 US tons Abbreviations and Acronyms AfDB African Development Bank BDEGL Banque de dEveloppement des Etats des grands lacs BEI Banque europ6enne d'investissement CCCE Caisse centrale de cooperation economique CEPGL Communaute economique des pays des grands lacs DANIDA Danish International Development Association DHER Departement de l'hydraulique et de l1'lectrique rurale EDF Electricite de France EGL Energie des pays des grands lacs ELECTROGAZ Etablissement public de production, de transport et de distribution d'eau, d'electricite et de gaz FED Fonds europeen de developpement FAC Fonds d'aide et de cooperation FAO Food and Agriculture Organization Government Governments of Burundi, Rwanda and Zaire KBO Organization for the Management and Development of the Kagera River Basin KfW Kreditanstalt fUr Wiederaufbau ONATOUR Office nationale de la tourbe REGIDESO Regie de distribution d'eau et d'l1ectricit6 SINELAC Socifte internationale d'electricite des pays des grands lacs SNEL Societe nationale d'electricite USAID United States Agency for International Development UNIDO United Nations Industrial Development Organization Financial Year = Calendar Year REGIDESO (Burundi), ELECTROGAZ (Rwanda) and SNEL (Zaire) SINELAC FOR OFFICIAL USE ONLY BURUNDI - RWANDA - ZAIRE RUZIZI II REGIONAL HYDROELECTRIC POWER PROJECT STAFF APPRAISAL REPORT Table of Contents I, THE ENERGY SECTOR Page No. Background .............................................. 1 Local Energy Resources .............. ........., 1 Energy Balances. 0 . 2 Burundi.d........ 2 Rwanda wanda... ............... 2 Zaire (Kivu)... 2 Recommendations to Improve the Energy Sector. 3 Burundi ........... ............. 3 Rwanda..... 3 Zaire (Kivu) .3.......... .3 II. POWER SECTOR BACKGROUND General... 3 International Institutions. 4 Power Supply Entities. 4 Historical Demand for Electric Power. 4 (i) Burundir.,d......... ... .... 4 (ii) Rwanda.... 4 (iii) Zaire (Kivu) .5... .......... 5 Existing Generating Facilities ..... 5 Works in Progress ..... 5 (i) Burundi........ 5 (ii) Rwandaa..... 6 (iii) Zaire (Kivu) ... ...... 6 Rural Electrification ..... 6 (i) Burundi.... 6 (ii) Rwanda and Zaire (Kivu).... 7 Government Strategies in the Power Sectors ... 7 (i) Burundi.... 7 (ii) Rwanda wa................. 7 (iii) Zaire (Kivu).... 8 IDA Strategies in the Power Sectors ..... 8 Regional Development Plan ..... 8 (i) Burundi ...... ...................................8 (ii) Rwanda ..... 9 (iii) Zaire (Kivu).... 9 This report was prepared by J. Boutan, mission leader, and C.H.A Killoran, who visited Burundi, Rwanda and Zaire in July and November, 1982. This documenthas a restricteddistribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwisebe disclosedwithout World Bank authorization. - ii - III. THE PROJECT Background ................................................. 10 Objectives of the Project .. 11 Main Features .............................................. 11 Environmental Considerations .. 12 IV. PROJECT COST AND FINANCING Cost Estimates............................................. 12 Basis for Estimates ........................................ 14 Financing Plan ................ ,.... 14 Implementation Schedule and Status of Engineering . 15 Procurement................................................ 17 Disbursements .............................................. 17 V. THE BORROWERSAND THE REGIONAL IMPLEMENTING AGENCY The Borrowers.............................................. 18 SINELAC - The Regional Implementing Agency . 18 Training............................................... 19 Audit.. 19 Budget .. 20 Insurance.. 20 Project Monitoring ......................................... 21 VI. FINANCIAL ANALYSIS Financing Plan .......................................... 21 Tariffs ............................... ,23 (i) Burundi: REGIDESO . 25 (ii) Rwanda: ELECTROGAZ .............................. 26 (iii) Zaire (Kivu): SNEL . 26 Convertibility of Currencies .. 27 SINELAC's Future Operations and Financial Position .. 27 VII. JUSTIFICATION FOR THE PROJECT Power Market . .............................................27 (i) Burundi .......................................... 28 (ii) Rwanda ........................................... 29 (iii) Zaire (Kivu). ...................................29 (iv) Interconnected System ............................ 30 Requirements for the Project ............................... 30 Comparison of Alternatives - Least Cost Solution........... 31 Rate of Return ............................................. 31 Risks ................... ,32 VIII. AGREEMENTS REACHED AND RECOMMENDATION Agreements Reached .. ................ 33 Recommendation .. ................ 36 - iii - LIST OF ANNEXES Annex 1 Energy Resources in Burundi, Rwanda and Zaire (Kivu) 2 Burundi Commercial Energy Balance 1973-1981 3 Rwanda Commercial Energy Balance 1975-1980 4 Regional Organizations 5 The Three National Electricity Companies: REGIDESO, ELECTROGAZ, SNEL 6 Interconnected System Electricity Sales, Burundi 7 Interconnected System Electricity Sales, Rwanda 8 Interconnected System Electricity Sales in Zaire (Kivu) 9 Generating Facilities, Burundi 10 Generating Facilities, Rwanda 11 Generating Facilities in Zaire (Kivu) 12 Project Description 13 Financing Plan 14 Implementation Schedule 15 Disbursement Schedule 16 SINELAC - Legal and Organizational Framework 17 Project Monitoring 18 SINELAC'S Forecast Income Statements, Funds Flow Statements, Balance Sheets 1987-1995 19 Assumptions in SINELAC's Financial Forecasts 20 Determination of the Minimum Purchase Level from Ruzizi II by REGIDESO, ELECTROGAZ, and SNEL 21 Sales of Ruzizi I and Ruzizi II Facilities in the Period 1983-1995 22 Comparison of the Economic Cost of Electricity Sold to Consumers from Ruzizi I and Ruzizi II 23 REGIDESO's Power Income Statements, Funds Flow Statements, Balance Sheets 1982-1989 24 ELECTROGAZ's Income Statements, Funds Flow Statements, Balance Sheets 1982-1988 25 SNEL's Bukavu - Uvira - Goma (Kivu) Forecast Income Statements, Funds Flow Statements, Fixed Assets 1982-1989 26 Interconnected System Electricity Demand 27 Economic Comparison between the Ruzizi II and Rwegura Projects 28 Diesel Generating Station - Estimate of Cost 29 Least Cost Solution 30 Economic Rate of Return for the Proposed Project 31 Sales of Ruzizi II, with an Annual Rate of Growth of 10% in Regional Demand until 1990 32 Related Documents and Data Available in Project File MAP IBRD 15919 Ruzizi II Regional Hydroelectric Power Project BBURUNDI-RWANDA-ZAIRE RUZIZI II REGIONAL HYDROELECTRIC POWER PROJECT I. THE ENERGY SECTOR Background 1.01 Burundi, Rwanda and Kivu province of Zaire lie just south of the equator in eastern central Africa, and in general have similar geographical features, with mountain peaks (elevation 2,700 m) and high level plateaus. Burundi with an area of 27,800 sq km and a population of 4 million, and Rwanda with an area of 26,338 sq km and a population of 4.9 million, are quite densely populated compared to Kivu with an area of about 257,000 sq km and a population of 4.3 million. The growth rate of the three popuilations, averaging about 2.2% per annum, is low compared to other African countries. Local Energy Resources 1.02 The principal resource in the Great Lakes region 1/, firewood, with its by-product charcoal, is rapidly being depleted in Burundi and Rwanda, and in isolated areas of Kivu. The potential for more hydro-electric development exists in all three countries but is costly due to the sites having low capacity, and being widely scattered. The best hydroelectric resource potential is in the rivers which form the borders of Rwanda with Tanzania and Zaire. There is little potential for oil, although there is a unique potential source of methane in the deep waters of Lake Kivu. Coal is mined at Kalemie, Zaire, about 300 km from Kivu province,and although large deposits of peat have been found in Burundi and Rwanda, the potential has not been fully developed. Hot springs occur in several areas of Burundi and in the northern part of Rwanda, suggesting the possibility of geothermal potential, but to-date this potential has not been fully explored. 1.03 In June 1982 the Bank puLiished Report No. 3778 entitled Burundi: Issues and Options in the Energy Sector, and a second Report No. 3779 entitled Rwanda: Issues and Options in the Energy Sector. In addition, in December 1981, the Bank prepared an Introductory Energy Sector Review of Zaire. Thus, in view of the considerable