NEDCO- Business Plan VOLTA RIVER AUTHORITY Northern Electricity Distribution Company

Transcription

1 NEDCO- Business Plan VOLTA RIVER AUTHORITY Northern Electricity Distribution Company

2 2 Presentation Outline! Purpose of Presentation! Executive Summary! NEDCo Profile! NEDCo Challenges! Objectives & Strategies! Conclusion

3 3 Purpose of Presentation! To introduce NEDCo to Donors! To begin a dialogue and seek their support on how NEDCo can become a self sustaining commercial operation in the next five years

4 4 Executive Summary (I)! NEDCo has grown substantially since its inception as the Northern Electricity Department (NED) in 1987! Customer growth: 19x; CAGR 13% ( )! Energy growth: 8.6x; CAGR 7%! Billed Revenue growth: 2,083x; CAGR 38%! NEDCo is today an unprofitable entity because the majority of its customers do not pay commercially viable tariffs! NEDCo s distribution system has been historically under-invested in and not capable to properly service the large geographic area it covers! Unacceptable quality of supply: Low voltages & frequent interruptions

5 5 Executive Summary (II)! NEDCo s objective over the next five years is to adequately resource the organisation to meet the extraordinary challenges it faces! Financial: Inadequate tariffs and commercial customers! Commercial : High losses! Technical: Unreliable and weak infrastructure and delivery systems! People & Systems: Well trained with appropriate logistics and IT systems! NEDCo s opportunity and challenge are to serve as a key partner in Government initiatives to transform the north into a major agricultural production zone! NEDCo s ability to resource to meet these challenges will ensure a self-sustaining commercial entity in the long-term

6 6 Profile- NEDCo! NEDCo supplies Electricity in Brong-Ahafo, Upper East, Upper West and Northern regions of Ghana and the northern parts of Ashanti and Volta regions! NEDCo also supplies electricity to some border towns of Burkina Faso and Togo! NEDCo operations today cover 64% of the geographical area of Ghana! Population Access of the Electricity is 36 %! NEDCo Distributes 10.2% of total energy consumed in Ghana! Customer Population was 380,000 at end of 2011

7 7 Profile- Customer Analysis! Customer Population has grown from 20,000 in 1990 to 380,000 in 2011! Compounded Average Growth Rate (CAGR) of number of customers of 13 % per Annum

8 NEDCo Number of Customers TOTAL CAGR :9% :11% :12% :13% DOMESTIC CAGR :9% :10% :12% :13% Number of Customers (thousands) Domestic(000) Commercial('000) Industrial'('000) Total('000) COMMERCIAL CAGR :10% :12% :12% :13% Domestic(000) Commercial('000) Industrial'('000) Total('000) Year INDUSTRIAL CAGR :6% :4% :4% :6%

9 9 Profile- Energy Growth! Energy Consumption grew from 60 GWh in 1990 to 519 GWh in 2011! Consumption Pattern! Residential Customers ( 82%) : 57 % of Energy! Non Residential Customers (17.9 %) : 31.1 % of Energy! SLT Customers (0.01 %) : 11.2 % of Energy

10 NEDCo Billed Energy Energy (GWh) TOTAL CAGR :7% :7% :6% :7% DOMESTIC CAGR :6% :5% :5% :7% Domestic('000,000) Commercial('000,000) Industrial('000,000) COMMERCIAL CAGR :10% :11% :9% :9% Total('000,000) Domestic('000,000) Commercial('000,000) Industrial('000,000) Total('000,000) Year INDUSTRIAL CAGR :4% :6% :5% :5%

11 11 Profile- Billed Revenue! Billed Revenue for NEDCo has grown at a compounded average growth rate (CAGR) of:! 28% for 2007 to 2011! 27% for 2002 to 2011! 30% for 1997 to 2011 and! 36% for 1992 to 2011

12 NEDCo Billed Revenue Domestic('000,000) Commercial('000,000) Industrial('000,000) Total('000,000) TOTAL CAGR :28% :29% :36% :38% Cedis (millions) COMMERCIAL CAGR : 33% :33% :42% :40% DOMESTIC CAGR :22% :25% :34% :38% INDUSTRIAL CAGR :28% :27% :30% :36% Domestic('000,000) Commercial('000,000) Industrial('000,000) Total('000,000) Year

13 SNAPSHOT OF 2011 CUSTOMER PROFILE 13 Customer Type % age of Total Customer Population % of total Energy Consumed % of Billed Revenue Average Energy Consumed/ Month (kwh) Average Tariff (GHS/kWh) Residential Non- Residential LV , MV 393, HV 319,

14 14 NEDCo 2011 Number of customers Industrial'('000), 0.04, 0% Commercial('00 0), 68.01, 18% Domestic(000), , 82% Domestic(000) Commercial('000) Industrial'('000)

15 NEDCo 2011 Billed Energy (kwh) , 12% , 32% , 56% Domestic('000,000) Commercial('000,000) Industrial('000,000)

16 NEDCo 2011 Billed Revenue (Million Cedis) , 14% 44.75, 36% Domestic('000,000) Commercial('000,000) Industrial('000,000) 62.79, 50%

17 17 CUSTOMER NUMBER, BILLED ENERGY AND BILLED REVENUE ANALYSIS FOR SUNYANI AND NORTHERN AREAS OF NEDCo

18 Sunyani Area Number of Customers , 0% 20,345, 18% Domestic Commercial Industrial 93,607, 82%

19 Sunyani Area Billed Energy(kWh) ,669,888, 18% 39,990,291, 24% 98,058,278, 58% Domestic Commercial Industrial

20 Sunyani Area Billed Revenue (Cedis) ,476,960, 22% 15,028,227, 39% 14,991,163, 39% Domestic Commercial Industrial

21 Northern Area Number of Customers , 0% 16,747, 17% Domestic Commercial Industrial 81,323, 83%

22 Northern Area Billed Energy ,440,844, 15% 70,803,112, 47% 56,866,160, 38% Domestic Commercial Industrial

23 Northern Area Billed Revenue ,161,486, 15% 11,440,688, 29% 22,386,700, 56% Domestic Commercial Industrial

24 24 NEDCo s 5-Year Performance : Year Energy Purchased (GWH) Energy Sales (GWH) Energy Loss (GWH) Distribution Loss %age % % % % Energy Billed Amount (GHC Million) Revenue Realized (GHC Million) Collection Efficiency %age 81.36% % % % 76.59% Energy Paid (GWH) ATC & C Loss %age % % % % %

25 25 Profit and Loss Account GH '000 GH '000 GH '000 GH '000 GH '000 Sale of electricity 35,437 53,957 58,737 94, ,978 Other income 1,107 1,223 1,246 1,367 1,288 Total revenue 36,544 55,180 59,983 95, ,266 Operating Costs 45,299 67,437 68, , ,312 Depreciation 16,681 19,089 25,205 23,992 29,309 Total expenses 61,980 86,526 94, , ,621 Net Profit/Loss for the year ( 25,436) ( 31,346) ( 34,022 ) ( 39,430) ( 35,355 )

26 26 NETWORK STATISTICS Mar 34.5kV Overhead (km) 4,643 5,001 6, kV Underground (km) kV line length (km) kV line length (km) kV Overhead (km) 1,286 1,340 1,741 11kV Underground (km) No. of Bulk Supply Points serving NED No. of 34.5/11KV Primary Substations (Including Dalun & Airport) No. of Secondary Substations 2,293 2,609 2, V line length (km) 8,540 8,990 9,618 Number of Customers 342, , ,468 Peak load (MW) Installed Transformer Capacity (MVA) Average Feeder Reliability (%)

27 27 Comparison with other Utilities Unit Ghana 2010 * Ghana 2011 * KPLC (Kenya) 2009 UK 2008 Russia Average demand per customer kw Average grid tariff GHS/MWh Average grid tariff US$/MWh Annual power distributed per km MWh/km Annual revenue per km of dist. Grid US$/km 4,600 5,187 6,822 8,631 8,643 6 Length of distr, grid per customer, meters meters *The values relating to distances for Ghana (4, 5 and 6) are estimated. The actual length of the GRID is now being determined.

28 28 NEDCo Challenges Financial Technical Commercial People & Systems

29 29 Challenges- Financial! Inadequate Tariff! Inadequate number of SLT ( Special Load Tariff) Customers! Unwillingness of Customers (including MDAs) to pay bills! Low Customer Density leading to High Investment Cost! Difficulty in Generating Sufficient Revenue to meet operational & working Capital

30 30 Challenges Commercial! High Commercial Losses ( Theft & Pilferages)! Estimated as 9.6% of billed energy! Poor Metering, Billing & Collection Efficiency! Collection rate of 77%! Large & Growing Asset base with Low Demand for Electrical Energy! ECG s customers per sq km are 29 whiles that of NEDCo are 2. Network asset value per customer in NEDCo is GHS774 as at end 2011.! Lack of Infrastructure, Resources & Business Processes for Quality Customer Service

31 31 Challenges Technical! High Technical Losses %! Long Distribution network with overloaded transformers! Inadequate Network and Customer Mapping! Low Voltages (Outside Acceptable Limits) at various Feeders.! Aged Equipment & Poor Power System Reliability! Suppressed Demand! Lack of Spares for Effective O&M

32 32 Challenges - People! Difficulty in Recruiting & Retaining Qualified & Experienced Staff! Lack of sufficient Human Capacity and absence of Capacity Building Exercises

33 33 Challenges - Systems! Poor ICT Infrastructure! Lack of Resources (Customer Care Cell, Logistics, Buildings, Tools & Equipment, Vehicles)! Inadequate Business Processes

34 34 Objectives - Financial! To make NEDCo financially self-sustainable by 2017 NORTHERN ELECTRICITY DISTRIBUTION COMPANY PROJECTIONS TO 2017 Profit and Loss Account Projections GH '000 GH '000 GH '000 GH '000 GH '000 GH '000 Sale of electricity 139, , , , , ,076 Other income 2,254 3,945 6,903 8,629 10,786 13, , , , , , ,558 Deduct: Operating Costs 160, , , , , ,982 Depreciation 28,019 29,819 31,619 33,419 35,219 37,019 Total expenses 188, , , , , ,001 Net Profit/Loss for the year without depn (18,720) (19,196) (8,607) (353) 12,187 25,576 Net Profit/Loss for the year with depn (46,738) (49,014) (40,226) (33,772) (23,032) (11,443) Sonabel expected margin 1,777 1,866 1,959 2,057 2,160 2,268 Adjusted net profit with Sonabel (44,962) (47,149) (38,267) (31,715) (20,872) (9,176)

35 35 Strategies Financial (I)! Reduce Financial, Commercial, Technical and Collection Losses! Submit proposal to PURC for a break-even tariff! Submit proposals to PURC and MOE for the introduction of a levy to support NEDCo

36 36 Strategies Financial (II)! Identify new customers such as:! Transfer of selected VRA customers (SONABEL) to NEDCo! New border town communities! Collaborate with SADA, GIPC, AGI to attract large customers to NEDCo! To ensure Stringent Budgetary Controls & Process

37 37 Financial - Projects & Investment! Procurement and installation of 200,000 prepayment meters with installation accessories at a total cost of US$17.5m as shown below Year Project Estimated Cost (US$) Install 30,000 meters 3,000, Install 70,000 meters 7,000, Install 45,000 meters 4,000, Install 55,000 meters 3,500,000

38 38 Objectives - Commercial! Reduce commercial Losses to 6.5 % by 2017 from 9.6% in 2011! Improve collection rate to 97.5% by 2017 from 76.6% in 2011! Improve Customer service Delivery and achieve 70% satisfaction (Power Quality & Reliability, Excellent Communication & Quick services)

39 39 Strategies Commercial (I)! Test & Recalibrate all Energy Meters! Relocate Existing Energy Meters in Enclosures! Installation of Prepayment Meters to all Customers! Intensification of Disconnection of defaulting customers

40 40 Strategies Commercial (II)! Increase the number of Customer Service Centers! Use of IT infrastructure to improve Revenue collection! Implement a new computerized billing system and improved business processes

41 Commercial - Projects & 41 Investment Initiative Estimated Cost (US$) Implementation of Distribution Transformer Metering system for Energy Audit Implementation of streetlight metering system 3,000,000 1,250,000 1,250, ,000 1,900,000 1,000, , ,000 Reduce commercial losses by 1% by December 2012 by installing 120,000 prepayment meters on hand and relocation of existing meters Implement a new meter data management and reporting system Total- USD 3,500,000 2,500,000 1,000, , ,000 8,600,000 2,500,000 3,450,000-1,650,000-1,000,000

42 42 Objectives - Technical! Reduce the technical losses to 6.5% by 2017 from 10.6% in 2011! Improve supply quality to customers in compliance with voltage levels in LI1816! Provide minimum spares for effective O&M.! Increase Access to electricity to meet GoG agenda of universal access by 2020

43 43 Strategies - Technical! Reinforce the Distribution Network! Improve Reliability & Availability of Power! Increase the Access of Power & increase System Capacity! Implement the Technical Losses reduction exercises! Implementation of High Voltage Distribution System! Distribution Network Optimization! Implement an Energy Audit & Project Management Team

44 Technical - Projects & Investment (I) 44 Initiative Estimated Cost (US$) Preparation of tender documents for the procurement of a computerised Distribution maintenance management system 100, , NPSIP - Sunyani and Techiman Areas( Ongoing) NPSIP Tamale, Bolga and Wa Areas 4,900,000 2,500,000 2,400,000 4,000,000 4,000,000 4 Distribution Network Rehabilitation Project (DNRP)- Ongoing 2,500,000 2,500,000-5 Distribution Network Rehabilitation Project (DNRP Phase II & III) 26,000,000 4,000,000 4,000,000 2,000,000 16,000,000

45 45 Technical - Projects & Investment (II) Initiative Estimated Cost (US$) NEDCo Supply Improvement/ Rehabilitation Project (NSIRP) ongoing 2,500,000 2,500,000 - NEDCo Supply Improvement/ Rehabilitation Project (NSIRP Phase II) 10,000,000 4,000,000 4,000,000 2,000,000 BUIPE SUBSTATION PROJECT-ongoing 2,000,000 2,000,000 - Provide part of the needed electricity distribution network spares and equipment (transformers, fuses, conductors, line hardware etc) for efficient and effective O&M and also for network extensions 66,318,213 9,700,000 8,000,000 8,000,000 12,656,763 27,961,450 Installation of Capacitor Banks to improve voltage levels

46 46 Technical - Projects & Investment (III) Initiative To develop an extensive distribution network development plan Construction of about 150km of 34kV line and associated projects to mitigate the effect of GRIDCo Upgrade Projects Construction of 34.5KV bay with eight (8) panel breakers at Wa Switchyard Construction of 59KM length of 34.5 KV line from Wa Main Substation to Lassia Toulou. Upgrade of 34Km length of 11.5KV line from Lassia Toulou through Wechau to Dorimon to 34kV and Replacement of 3No, 20KV transformers and 6No. 11.5KV transformers with 34.5kV transformers Estimated Cost (US$) 0 21,000,000 3,000,000 2,880,000 2,080, ,000,000 7,000,000 7,000,000 3,000,000 1,500,000 1,500,000 1,000,000 1,880,000 1,000,000 1,080,000

47 Initiative Technical - Projects & Investment (IV) Construction of 6 NO. 34/11KV SUBSTATIONS AND INTENSIFICATION IN ALL NEDCO AREAS Construction of 34/11kV substations at UDS Tamale and Sunyani Hospital Implementation of high voltage distribution system and injection of new service stations (capacity expansion) Implement distribution system optimization ( re-configuration of distribution lines, proper sizing of conductors and transformers, load balancing etc) Prepare a long term distribution system expansion plan to meet the Government s vision 2020 agenda Estimated Cost (US$) 32,000,000 6,000,000 7,000,000 6,000,000 6,000,000 7,000,000 20,000,000-6,000,000 6,000,000 8,000,000 35,000,000-20,000,000 7,000,000 1,000,000 3,000,000 1,800, ,000 1,300,000 15,000,000 3,000,000

48 Objectives & Strategies 48 People & Systems (I)! Capacity building of personnel for effective deliveries in knowledge, skill and attitude for about 70 staff per annum.! Implement ICT infrastructure (LAN, WLAN, WAN, Radio Communication Infrastructure etc)! Provide adequate Logistics (vehicles (100), tools, equipment etc)! Creating additional suitable office and residential accommodation (135)! Review of Inadequate business processes. (new service connection, complaints receipt and resolution systems, customer data management systems etc)

49 49 Objectives & Strategies People & Systems (II)! Implementation of the approved New NEDCo Organogram! To equip NEDCo Management with the required skills and capacity to run NEDCo! To equip NEDCo with project management skills to manage all projects from this plan

50 50 People & System Project & Investment (I) 1 Estimated Initiative Cost (US$) Provide the needed 14,000,000 1,759,357 3,240,643 3,000,000 4,000,000 vehicles and specialised 2,000,000 equipment, tools, safety ware etc for better service. 2 Radio Communication improvement 4,920,000 1,700,000 1,300, , , ,000 3 NEDCo Wide Area Network (WAN), Local Area Networks and Wireless Broadband 4,720,000 2,820,000 1,500, , , NEDCo Billing System Improvement A complete ICT system to evaluate the distribution network loss, reduce the losses and enhance quality service delivery (GIS, load flow analysis, meter data management, call centers etc.) 500, ,000 7,000, ,000 5,270,000 1,000, ,000

51 51 People & System Project & Investment (II) Initiative Estimated Cost (US$) Effective 1,570, , , ,000 customer 250, ,000 education through sms group messaging Create more customer service centres and cash collection points Improve skills of staff & capacity building Provide adequate office/residential accommodation (complete ongoing projects, provision of furnishing for completed offices) 4,500,000 1,500,000 1,200,000 99, , ,000 31,800, ,000-2,000,000 1,500,000 1,500, ,000 2,000, ,000 17,000, ,000 10,000,000

52 52 Partner for Northern Economic Development! VRA is involved in several initiatives that will positively impact economic development in the NEDCo operating area! Construction of two hydro plants at Pwalugu and Juale by 2018/2019! Construction of 10 MW of solar facilities by 2014! Upgrade of inland port facilities at Buipe/Yapei and across the Volta Lake as well as injection of new investment and equity partners in VRA lake transport subsidiary ( VLTC )! Pwalugu 50 MW hydro plant is expected to provide important additional benefits! Irrigation and flood control! NEDCo has commenced a close collaboration with SADA to anticipate these developments. NEDCo s ability to service resulting newly created commercial customers will both provide new revenue and attract additional commercial customers for NEDCo

53 53 Summary Investment (I) Investment Estimated Cost (USD) Ongoing Projects (2012) 17,089,175 Short Term (Jan-13 to Dec-13) 63,950,826 Medium Term (Jan-14 to Dec-16) 192,236,763 Long Term (Jan-17..) 71,111,450 TOTAL (USD) 344,388,213

54 Summary Investment (II) 54 Profit and Loss Account Projections GH '000 GH '000 GH '000 GH '000 GH '000 GH '000 Sale of electricity 139, , , , , ,076 Other income 2,254 3,945 6,903 8,629 10,786 13,482 Deduct: 141, , , , , ,558 Operating Costs 160, , , , , ,982 Depreciation 28,019 29,819 31,619 33,419 35,219 37,019 Total expenses 188, , , , , ,001 Net Profit/Loss for the year without depn (18,720) (19,196) (8,607) (353) 12,187 25,576 Net Profit/Loss for the year with depn (46,738) (49,014) (40,226) (33,772) (23,032) (11,443) Sonabel expected margin 1,777 1,866 1,959 2,057 2,160 2,268 Adjusted net profit with Sonabel (44,962) (47,149) (38,267) (31,715) (20,872) (9,176)

55 55 Summary Investment (III)! Subsequent to the challenges identified, NEDCo has initiated some projects to address some of them as outlined below:! Distribution Network Rehabilitation Project (DNRP):! NEDCo Supply Improvement and Rehabilitation Project (NSIRP)! Installation of Prepayment Meters

56 56 Conclusion (I) 1. The Northern Electricity Department was created as a result of the extension of the National GRID to the Northern parts of Ghana. 2. Because of the low customer density and the absence of large industrial customers, the design standards of the network were relaxed in order to make the extension economically feasible. The design was to allow for the ultimate utilization of some components of the networks by Despite this, no substantial investment has been made in the network over the past 25 years except the US$10m GEDAP assistance.

57 57 Conclusion (II) 4. This lack of investment has created Financial, Technical, Commercial and People/System challenges to NEDCo which was formed as part of the Power Sector Reform. 5. Among others, the challenges have led to: a. Recurring financial losses to NEDCo b. High Distribution losses

58 58 Conclusion (III) c. Poor Collection rate d. Obsolete IT infrastructure e. Ineffective and inefficient business processes f. Staff with inadequate capacity g. Lack of logistics such as vehicles, tools and equipment h. Lack of suitable office and residential accommodation

59 Conclusion (IV) 59! Increase Collection Efficiency! Enhance the skills of Employees! Submitting a case for Tariff Review! Capacity Enhancement! Add more Bulk Customers! Implement an IT Infrastructure! Reduce Distribution Losses! Reduce the Gap of Revenue Vs Operating Expenses

60 60 Conclusion (V) 6. This Business Plan has identified some strategies and projects to address the challenges and achieve the following: i. Make NEDCo financially Self Sustainable by 2017 ii. Bring Technical Losses to 6.5 % by 2017 iii. Bring Commercial Losses to 6.5% by 2017

61 61 Conclusion (VI) iv. Achieve Collection rate of not less than 97 % by 2017 v. Upgrade the IT infrastructure vi. Better Customer Delivery vii. Capacity Enhancement of Staff 7. The total estimated cost of the investments is US$344m out of which US$17m projects are already ongoing from NEDCo s own resources. 8. We hope donors will support us to enhance our service delivery to our customers

62 62 Thank You